ANNUAL REPORT INTERENERGO d.o.o., Ljubljana INTERENERGO GROUP

Transcription

1 ANNUAL REPORT 2012 INTERENERGO d.o.o., Ljubljana INTERENERGO GROUP

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3 TABLE OF CONTENTS: I. INTRODUCTION 7 1 PERFORMANCE HIGHLIGHTS FOR INTERENERGO AND ITS GROUP 7 2 LETTER FROM THE MANAGING DIRECTORS 9 3 PRESENTATION OF INTERENERGO AND ITS GROUP Profile of Interenergo and its Group Ownership of Interenergo Structure of the Interenergo Group Milestones of Interenergo and its Group Activities of Interenergo and its Group Business policy of Interenergo and its Group 15 II. BUSINESS REPORT 17 1 ECONOMIC ENVIRONMENT AND ITS IMPACTS ON INTERENERGO AND ITS GROUP IN Economic environment in Central and South-Eastern Europe 17 2 PERFORMANCE OF INTERENERGO AND ITS GROUP IN Performance ratios of Interenergo Trading activities Investment activities 20 3 SUSTAINABLE POLICY OF INTERENERGO AND ITS GROUP Business responsibility Employees Environmental responsibility General social responsibility 22 4 RISK MANAGEMENT BY INTERENERGO AND ITS GROUP Market risks Credit risk Legal risk Operational risk Other risks 24 5 SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE 25 6 RELATED PARTY TRANSACTIONS 25 7 STATEMENT OF MANAGEMENT S RESPONSIBILITY 25 III. ACCOUNTING REPORT OF INTERENERGO d.o.o FINANCIAL STATEMENTS BALANCE SHEET as at 31 December INCOME STATEMENT as at 31 December STATEMENT OF OTHER COMPREHENSIVE INCOME as at 31 December STATEMENT OF CASH FLOWS as at 31 December STATEMENT OF CHANGES IN EQUITY as at 31 December STATEMENT OF ACCUMULATED LOSS as at 31 December ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Basis for the preparation of financial statements Summary of significant accounting policies Notes to the financial statements Intangible assets and property, plant and equipment Long-term investments Deferred tax assets Short-term investments Short-term operating receivables Cash Short-term deferred costs and accrued revenue Equity Provisions and long-term accrued costs and deferred revenus Long-term financial liabilities Short-term financial liabilities Short-term operating liabilities Short-term accrued costs and deferred revenue Net sales Costs of goods, materials and services Costs by function Labour costs Revaluation operating expenses Financial revenue Financial expenses Current and deferred taxes Contingent liabilities Events after the balance sheet date 45 3 INDEPENDENT AUDITOR'S REPORT 46 3

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5 IV. ACCOUNTING REPORT OF THE INTERENERGO GROUP 49 1 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET as at 31 December CONSOLIDATED INCOME STATEMENT as at 31 December CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME as at 31 December CONSOLIDATED STATEMENT OF CASH FLOWS as at 31 December CONSOLIDATED STATEMENT OF CHANGES IN EQUITY as at 31 December ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Basis for the preparation of consolidated financial statements Summary of significant accounting policies Notes to the consolidated financial statements Intangible assets Property, plant and equipment Long-term investments Long-term operating receivables Deferred tax assets Short-term investments Short-term operating receivables Cash Short-term deferred costs and accrued revenue Equity Long-term financial liabilities Long-term operating liabilities Short-term financial liabilities Short-term operating liabilities Short-term accrued costs and deferred revenue Net sales Capitalised own products Other operating revenue Costs of goods, materials and services Costs by function Labour costs Write-downs in value Other operating expenses Financial revenue Financial expenses for financial liabilities Income tax Contingent liabilities Concessions for the hydropower plants Significant events after the balance sheet date 70 3 Independent Auditor's Report 71 CONTENTS OF SCHEMES Sheme 1: Ownership of Interenergo 12 Sheme 2: Structure of the Interenergo Group 12 CONTENTS OF FIGURES Figure 1: Presence in international markets 20 Figure 2: Map of Interenergo hydropower plants and two solar plants 20 5

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7 I. INTRODUCTION 1 PERFORMANCE HIGHLIGHTS FOR INTERENERGO AND ITS GROUP Performance highlights for Interenergo and its Group for 2012 and Interenergo Index 2012/2011 Assets 57,604,609 41,428, % Equity 17,585,335 16,577, % Total revenue 196,740, ,755, % EBIT 469,575 44, % EBITDA 1,058,163 54, % Net profit or loss 996,058 5,876 16,951.3 % Trading volumes (electricity) 3,3 twh 3,5 twh 94 % Interenergo Group Index 2012/2011 Assets 60,181,147 42,242, % Equity 16,001,676 15,756, % Total revenue 196,081, ,976, % EBIT 492, , % EBITDA 638, , % Net profit or loss 247, , % Trading volumes (electricity) 3,8 twh 3,8 twh 100 % 7

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9 2 LETTER FROM THE MANAGING DIRECTORS The parent company Interenergo and the whole Interenergo Group were successful in We generated EUR 196 million in revenue from electricity trading, in volume terms 3,8 terawatt hours. Profitability remained more or less the same as in Investments of the Group in renewable energy sources followed the growing trend which we begun in the previous years, and amounted to EUR 12,9 million. We started production in the Novakovići small hydropower plant, we took over three other small hydropower plants in the Federation of Bosnia and Herzegovina, and constructed two solar power plants in Slovenia. All electricity production facilities within the Group now have 11,4 megawatt of installed capacity. We strengthened our presence in international wholesale electricity markets, also by becoming member of the Hungarian power exchange in All in all, the volume of trading in wholesale markets was similar as in 2011, with the exception of Serbia and Montenegro, where it doubled. In 2012, we also expanded the circle of our key suppliers and buyers and thus decreased our dependence on a few business partners in order to ensure our future successful development. Our trading partners are all energy companies which are present in the region, trading companies and local producers. We worked intensively also on development projects for hydro power, wind power and solar power plants in Slovenia and in the countries of South-Eastern Europe, which will expand our portfolio of production facilities in Our already international group expanded by integrating three new companies. There were also new employments in the parent and its subsidiaries, required in order to strengthen the team in view of our business objectives. Falling electricity prices in late 2011 and early 2012 affected our trading operations in Extreme hydrology conditions continued from 2011 throughout River flows decreased compared to previous years, some river flows in Bosnia and Herzegovina by as much as 30% of long term averages. The resulting electricity price fluctuations, however, were recognised as an opportunity by our trading department. Also the complex economic conditions in Slovenia and Europe did not have a negative effect on our operations. The success of the Interenergo Group stems from stable operations and capital strength of the Kelag company as our owner. The good results achieved in 2012 are an excellent basis from which to continue implementing our vision, which includes investments in renewable energy sources and expansion in international wholesale electricity markets. Anton Papež, Managing Director, Interenergo d.o.o. Christian Schwarz, Managing Director, Interenergo d.o.o. 9

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11 3 PRESENTATION OF INTERENERGO AND ITS GROUP 3.1 Profile of Interenergo and its Group Company name: Shortened company name: INTERENERGO d.o.o. Company name in English: Shortened company name in English: Registered office: INTERENERGO, energetski inženiring, d.o.o. INTERENERGO, energy engineering, Ltd. INTERENERGO Ltd. Tivolska cesta 48, SI Ljubljana, Slovenia Telephone: +386 (0) Website: info@interenergo.si Date of establishment: 25 July 2006 Main business activity: Production of electricity in hydropower plants Ownership: KI-KELAG INTERNATIONAL, GmbH, 100% Share capital: EUR 10,200,000 Tax number: Company ID number: Governing bodies: Management Board: Managing Director: Managing Director: Holder of procuration: Holder of procuration: Holder of procuration: Holder of procuration: Anton Papež Christian Schwarz Blaž Šterk Wolfgang Lyssy Ingo Preiss Martin Dolzer Supervisory Board: Chairman: Deputy Chairman: Member: Armin Wiersma Hermann Egger Gerald Berger 11

12 3.2 Ownership of Interenergo Sheme 1: ownership of interenergo KELAG (Kaerntner-Elektrizitaets-Aktiengesellschaft) 100% KI-KELAG International GmbH 100% Interenergo d.o.o. In November 2009, KI-KELAG International GmbH acquired 100% of Interenergo d.o.o., which thus joined the Austrian KELAG Group (KELAG-Kärntner-Elektrizitäts-Aktiengesellschaft). 3.3 Structure of the Interenergo Group Sheme 2: structure of the interenergo group IE d.o.o. Zagreb 100% IE d.o.o. Sarajevo 100% EHE d.o.o. Banja Luka 100% IEP energija d.o.o. Gornji Vakuf Uskoplje 100% IE electric d.o.o. Banja Luka 27% LSB Elektrane d.o.o. Banja Luka 100% Inter-Hem d.o.o. Banja Luka 100% Inter-Energo d.o.o. Gornji Vakuf Uskoplje 100% PLC IE d.o.o. Beograd 100% Hidrowatt d.o.o. Beograd 80% SLO IE Makedonija d.o.o.e.l. 100% HR BiH SRB MK = Trading = Projects IE = Interenergo The Interenergo Group comprises the parent company Interenergo d.o.o. and eleven subsidiaries established in the countries of South-Eastern Europe. 12

13 Companies wholly owned by Interenergo: Interenergo d.o.o., Sarajevo, Bosnia and Herzegovina Interenergo d.o.o., Zagreb, Croatia Interenergo Makedonija d.o.o. e.l., Skopje, Macedonia Inter Hem d.o.o., Banja Luka, Bosnia and Herzegovina LSB Elektrane d.o.o., Banja Luka, Bosnia and Herzegovina PLC Interenergo d.o.o., Belgrade, Serbia EHE d.o.o., Banja Luka, Bosnia and Herzegovina IEP energija d.o.o., Gornji Vakuf Uskoplje, Bosnia and Herzegovina Inter-Energo d.o.o., Gornji Vakuf Uskoplje, Bosnia and Herzegovina Companies partly owned by Interenergo: IE Electric d.o.o., Banja Luka, Bosnia and Herzegovina (27%); Hidrowatt d.o.o., Beograd, Serbia (80% indirect over PLC Interenergo d.o.o., Belgrade, Serbia. 3.4 Milestones of Interenergo and its Group YEAR Event 2007 Interenergo d.o.o., Ljubljana, Slovenia, starts its operations. April 2007 Foundation of Interenergo d.o.o. Sarajevo, Bosnia and Herzegovina, a wholly owned subsidiary. June 2007 July 2007 October 2007 March 2008 February 2009 November 2009 February 2010 September 2010 October 2010 June 2011 July 2011 October 2011 March 2012 June 2012 July 2012 December 2012 Foundation of Interenergo Makedonija d.o.o.e.l., Skopje, Macedonia, a wholly owned subsidiary. Acquisition of EHE d.o.o., Banja Luka, Bosnia and Herzegovina, a wholly owned subsidiary. Transformation of Poteza invest d.o.o. into PLC Interenergo d.o.o., Belgrade, Serbia, a wholly owned subsidiary. Acquisition of Interenergo d.o.o., Zagreb, Croatia, a wholly owned subsidiary. The Serbian subsidiary PLC Interenergo d.o.o. acquires 80% of Hidrowatt, a company at that time constructing a small hydropower plant Poštica, which later becomes the first private foreign-owned small hydropower plant in Serbia. KI-KELAG International GmbH acquires 100% of Interenergo d.o.o., which thus joins the Austrian KELAG Group (KELAG-Kärntner-Elektrizitäts-Aktiengesellschaft). The small hydropower plant Poštica owned by Hidrowatt starts production. An agreement is signed on the purchase of three small hydropower plants in the Federation of Bosnia and Herzegovina (Jelići, Derala, Ružnovac). Trading volume exceeds for the first time one terawatt hour. Approval for the transfer of four concessions in Republika Srpska (Bosnia and Herzegovina) is obtained. Acquisition of IEP energija d.o.o. Gornji Vakuf Uskoplje in Bosnia and Herzegovina, which owns two small hydropower plants Sastavci and Duboki Potok. Co-foundation of Interenergo electric d.o.o., Banja Luka, Bosnia and Herzegovina, a 27.27% owned subsidiary. Integration of company LSB Elektrane d.o.o. Banja Luka in Interenergo Group. Opening of a small hydropower plant Novakovići (Republika Srpska) and construction of solar power plant Martex (Slovenia). Integration of company Inter-Hem d.o.o. Banja Luka in Interenergo Group. Integration of new company Inter-Energo d.o.o., Gornji Vakuf Uskoplje In the Interenergo Group and construction of solar power plant Mura (Slovenia) 13

14 3.5 Activities of Interenergo and its Group The basic activities of Interenergo and other companies within the Interenergo Group are electricity trading and investing in production facilities using renewable sources. We trade with electricity in wholesale and retail markets. To ensure our success in electricity trading, we have set up an efficient network of licensed companies members of the Interenergo Group. Through its market activities, the Group contributes to a safe and efficient electricity supply in its target markets. When investing, we mainly focus on the construction and modernisation of production facilities using renewable sources: water, sun and wind. When constructing new or modernising existing facilities, Group companies use advanced technologies that meet the highest standards in terms of production efficiency and safety. When designing, constructing and managing energy facilities, Group companies always try to reduce any negative environmental impacts and encourage development in the local environments. Business objectives of Interenergo and its Group Investments in production facilities using renewable sources. Establishment and development of an efficient network of subsidiaries offering support in acquiring and managing energy projects and in electricity trading. Active management of own energy facilities. International electricity trading (cross-border trading). Business focus of Interenergo and its Group Acquisition of concessions for the construction of new production facilities in South-Eastern Europe, such as: hydropower plants, wind power plants and solar power plants. Investments in modernisation and management of the existing production facilities using renewable energy sources when they fall behind their production potential due to obsolete technology and inadequate management. Investments in new facilities for electricity generation. Intermediation in electricity trading, to be expanded in the future to trading in electricity generated in production facilities owned by the Group or its business partners. Operations in South-Eastern and Central Europe In the current development phase, the primary countries for investments are Bosnia and Herzegovina, Croatia, Slovenia and Serbia. As regards electricity trading, the target region is wider and comprises, in addition to the above countries, also Austria, Italy, Hungary, Germany, Macedonia, Montenegro and several neighbouring countries where Interenergo trades on the border. With the aim of setting up an electricity trading infrastructure and gaining new investment projects, Interenergo has established 100%-owned subsidiaries in all primary markets. For investments in energy facilities, the Company has been establishing or acquiring shares of project companies. 14

15 3.6 Business policy of Interenergo and its Group Interenergo is an international company established in Ljubljana, and is the parent company of the Interenergo Group. The Group is present in energy markets of Central and South-Eastern Europe. Its operations are stable, and the Group is development-oriented. The primary business objective and core responsibility of the Group is safe and business-efficient supply of electricity, and implementation of investment projects that promote economically, environmentally and socially responsible exploitation of renewable energy sources. Vision In the next five years, the Interenergo Group will become the largest foreign private investor in electricity generation from renewable energy sources in the area of the former Yugoslavia, in the segment of small and medium-sized production facilities. The Group will have at its disposal 300 gigawatt hours of electricity from its own production, and will achieve a trading volume of 4,5 terawatt hours in international markets. Mission To ensure safe and efficient supply of electricity produced from renewable energy sources. Values: Reliable, safe and environmentally-friendly electricity production. Vertical integration from production to the end consumer. Transparent and efficient operations. Environmental awareness. Employee involvement in the development of companies. Strategic objectives Expansion of the trading network in the energy markets of Central and South-Eastern Europe. Strengthening of competitive advantages in wholesale trading. Effective management of existing facilities with the aim of ensuring their long-term, safe and business-efficient operations. Investing in the construction and modernisation of production facilities using renewable sources. 15

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17 II. BUSINESS REPORT 1 ECONOMIC ENVIRONMENT AND ITS IMPACTS ON INTERENERGO AND ITS GROUP IN 2012 In order to be successful in electricity trading, it is important that the Group quickly adapts to the situation in energy markets. The investment projects are mainly carried out in the countries of the former Yugoslavia, which are characterised by a prolonged recession, low investment level and slow development. In 2012, the Group operated successfully in the demanding economic situation in the countries of the former Yugoslavia, which is proved by the investments made in hydropower plants, the investments in progress and the investment plans for future years. 1.1 Economic environment in Central and South-Eastern Europe Negative economic trends in Slovenia from previous years continued also throughout According to the latest information available (UMAR), the real GDP growth rate was negative at 2.5%. Exports of goods remained at the 2011 level, while production in manufacturing improved only in technologically advanced sectors. Turnover in trade and market services declined. The volume of loans to enterprises declined due to their deleveraging in domestic banks, as well as tightened credit conditions. Enterprises had difficulties borrowing from foreign banks as well, which were usually willing to grant only short-term loans. Labour market conditions tightened further. According to the Statistical Office, unemployment rate was 11.9% at year-end 2012, which translates into 118,061 unemployed persons. The average monthly gross salary was EUR 1, It remained unchanged throughout 2012 in the private sector, while it declined in the last three months in the public and general government sector. Consumer prices increased by 2.7% compared to December Growth in energy prices was slower than a year ago, mainly on the account of a fall in gas prices. Prices of services, on the contrary, increased compared to The declining GDP, competitiveness, as well as sovereign and bank credit ratings are trends observable also in other countries of South-Eastern Europe. Countries like Serbia, Croatia and Bosnia and Herzegovina are additionally coping also with high rates of inflation and unemployment. Member States of the European Union are also seeing their economies shrink, and have resorted to decisive structural reforms that give hope for a more stable and uniform economic growth in the European Union in the next years. 17

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19 2 PERFORMANCE OF INTERENERGO AND ITS GROUP IN Performance ratios of Interenergo RATIOS Equity financing rate: equity/liabilities Long-term financing rate: (equity+long-term liabilities)/liabilities Operating fixed assets rate: fixed assets/assets Long-term investment rate: (fixed assets+long-term financial assets+investment property+long-term receivables)/assets Equity to fixed operating assets: equity/fixed assets Equity to long-term assets: equity/long-term assets Immediate solvency ratio: liquid assets (cash+short-term listed financial assets)/ short-term liabilities INTERENERGO INTERENERGO GROUP ,305 0,400 0,265 0,373 0,545 0,494 0,542 0,466 0,052 0,001 0,497 0,344 0,446 0,166 0,497 0,345 5, ,075 0,535 1,085 0,675 2,287 0,527 1,055 0,193 0,357 0,077 0,447 Quick ratio: 1,017 2,188 1,083 2,272 (liquid assets+short-term receivables)/short-term liabilities Current ratio: 1,902 4,081 1,083 2,329 short-term assets/short-term liabilities Operating effectiveness ratio: 1,002 1,000 1,003 1,004 operating revenue/operating expenses Participation rate of labour costs in operating revenue: 0,006 0,004 0,006 0,005 labour costs/operating revenue Participation rate of material costs in operating revenue: 0,985 0,995 0,987 0,983 costs of material/operating revenue Participation rate of net profit in revenue: 0,005 0,000 0,001 0,002 net profit/revenue Net return on equity: 0,059 0,001 0,016 0,038 net profit for the period/average equity Dividend ratio of equity: 0,000 0,000 0,000 0,000 19

20 2.2 Trading activities The Interenergo Group was successful in the area of energy trading in In volume terms, electricity sold by the Group amounted to 3.8 terawatt hours. We were mainly focused on short-term daily, weekly and monthly trading. Annual contracts concluded were similar in volume terms to those concluded a year ago. We also became member of the Hungarian power exchange (HUPX) and of the regional power exchange BSP Southpool Serbia, while we have been members of EEX and EPEX for several years now. We also traded very actively in the bilateral (OTC) market. All in all, we intensively traded in the energy markets of the following countries in 2012: Slovenia, Austria, Germany, Bosnia and Herzegovina, Montenegro, Croatia and Hungary. The majority of trading is attributable to the trading department of the parent company Interenergo d.o.o. Total turnover amounted to EUR f i g u r e 1: p r e s e n c e in i n t e r n at i o n a l m a r k e t s 2.3 Investment activities Investment activities in 2012 were in accordance with our vision to establish a stable portfolio of investments in electricity generating facilities to ensure a stable flow of revenue in the long term. We continued working on certain unfinished projects and launched new ones in The small run-of-river hydropower plant Novakovići on the Ugar river in Republika Srpska started production, and we acquired another three small hydropower plants in the Federation of Bosnia and Herzegovina towards year-end Production started also in two solar power plants in Slovenia, Mura in Prekmurje and Martex in Primorska. The total production capacity of our energy facilities was 39,49 GWh at year-end We also continued with preparations of certain investments in energy facilities in Slovenia, Serbia and Bosnia and Herzegovina, which should start operations within the next couple of years. figure 2: m a p o f interenergo h y d r o p o w e r p l a n t s and two solar plants MARTEX MURA DUBOKI POTOK NOVAKOVIĆI SASTAVCI JELIĆI, DERALA RUŽNOVAC POŠTICA 20

21 3. SUSTAINABLE POLICY OF INTERENERGO AND ITS GROUP The main responsibility of the Interenergo Group is the reliable generation and supply of electricity, which in turn guarantees our effectiveness and development. Our successful operations and development are dependent on our competent employees, for which reason we invest in them and aim at open communications. When constructing new or modernising the existing energy facilities, we comply with the standards that promote environmentallyfriendly and technologically advanced construction. We involve local people in all our investment projects. We work together with the local communities to identify opportunities for their development brought about by our investment projects. We support cultural and educational organisations and projects that enrich the society and contribute to development. Interenergo is aware that socially-responsible actions set the foundations for long-term success. That is why our corporate policy includes fair and ethical operations, responsible attitude to the environment and care for the wider social environment. 3.1 Business responsibility Business responsibility is primarily based on the strategic orientation of the company towards renewable energy sources that are becoming an increasingly important segment of the energy industry. All companies members of the Interenergo Group conduct business in a transparent and fair manner. Management and employees of the parent company pursue a well-though-out and sustainable corporate strategy that is based on achievable objectives and secures long-term existence of the company. Development of the Group is based on investments in renewable energy sources that in 2012 totalled EUR 12.9 million. Group companies do not borrow from financial institutions to finance development plans and investments; instead, all funds are obtained in the form of equity or loans from the owner. The financial position of the parent company and the whole Group is good. Our profitability is not yet at the level of the leading energy groups, as we are still in the early phase of development of our business potential. The 100% owner Kelag Group has an A (stable) rating according to S&P. This enables Group companies to pursue ambitious business strategies even in the current tight economic situation. 3.2 Employees Group companies offer to their employees a stimulating work environment with opportunities for personal and professional development. Their management is well aware that highly-educated and motivated employees are the precondition for the achievement of business objectives. Management of the parent company is responsible for employee training, which is tailored to the requirements of the local environments where Interenergo and its Group operate. We have variable remuneration systems in place that are customised to the nature of employees work to promote proactive performance and dedication. In 2012, employees participated in a project of lifelong career orientation, which offered training events aimed at updating of skills. We also organised an excursion to the Krško nuclear plant, and a winter sports weekend. 21

22 3.3. Environmental responsibility Investment projects are implemented in accordance with the environmental and technical standards of the Kelag Group. In the process of constructing the energy facilities, the Interenergo Group complies with all applicable legislative frameworks. All newly constructed and modernised facilities are technologically advanced, made of environment-friendly materials and meet the highest safety standards. This ensures their minimum environmental impact. 3.4 General social responsibility We support artistic creativity, educational and scientific institutions and organisation of conferences in the area of energy. In the past, we supported several artistic exhibitions, the issue of conference proceedings of the IEDC international business school, and refurbishment of several schools. In 2012, we supported the organisation of the 14th conference Energy Days and the Festival of Ljubljana. We donated to the Institute Dr. Janez Evangelist Krek. 22

23 4 RISK MANAGEMENT BY INTERENERGO AND ITS GROUP Entrepreneurs agree that you cannot have opportunity without risk. The key objective of the Interenergo Group is to ensure appropriate and effective risk identification, monitoring and management. To this end, the Interenergo Group operates a risk management system that addresses risks arising from its own activities as well as from its markets. The Group-wide rules and minimum standards ensure systematic and uniform risk management. It is the Group s strategic goal to raise risk awareness at all levels, to systematically address risk aspects in all business decisions, to improve performance of internal control systems and reporting and to establish a value-oriented risk culture at all levels of the Group, beyond the scope of the statutory requirements. The main focus of the Group-wide risk management relates to five risk categories market risks, credit risk, legal risk, operational risk and other risks. Risks are identified and managed for each business division. 4.1 Market risks Energy price changes and exchange rate fluctuations constitute the key market risks within the Interenergo Group. Market risk is defined as potential losses resulting from changes in market prices. This risk arises as a result of holding an open position and increases with price fluctuation or volatility. Volatility of and developments in commodity prices have a significant effect on profit of Group companies, and are therefore closely monitored. Interenergo monitors its open positions in view of various limits laid down in its policies, rules and management decisions. Its policies do not allow any major open positions. Currency risk mainly arises from the sale/purchase of goods with origin outside the buyer s/seller s currency area, or indices expressed in different currencies. To reduce currency risk, all contracts to buy and sell electricity are EURdenominated. 4.2 Credit risk Credit risk is defined as the risk that a contractual party will fail to meet its contractual obligations, thus affecting the company s cash flow. Credit risk exists both for open and closed positions up to the actual settlement date (settlement risk) and up to the contractual delivery date (replacement risk). Interenergo manages this risk by means of the EFET standard contracts which lay down the general legal framework. The risk is also managed by checking the counterparty s credit rating and by monitoring its creditworthiness throughout the contractual relationship, the intensity depending on the value of the contract with the counterparty (electricity trader). The required guarantees and trading limits are expressed in absolute terms and in view of the closely monitored limits/credit lines applying to each partner. 23

24 4.3 Legal risk Legal risk is defined as the risk of loss caused by non-compliance with the applicable laws and regulations. It arises mainly from contracts and agreements not clearly specified or documented. Legal risk must be taken into account of above all within the Group's expansion activities, in particular if the country of interest is politically unstable. In certain countries, legal risk arises from the poor legal environment. Interenergo has the necessary legal competencies and cooperates with local offices, if necessary. The Group uses the EFET standard contracts, as well as standard forms for legal documents (bank guarantees, parent company guarantees, comfort letters, etc.). Legal risk is closely monitored by the risk management and legal department. 4.4 Operational risk Operational risk is defined as the risk associated with an entity s information technology system, internal controls and employees. If such risk materialises, the entity might suffer a financial loss. The Group manages this risk by defining in great detail its business processes, internal controls, job descriptions, etc. Furthermore, employees are continuously trained, and certain business processes follow the four-eye principle. 4.5 Other risks The company is exposed to other risks, such as liquidity risk, regulatory risk, political risks, investment risk, etc., which are covered by the Group s risk management system and closely monitored by the competent departments. 24

25 5 SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE There were no significant events after year-end RELATED PARTY TRANSACTIONS Considering the circumstances known to us at the time of each and every legal transaction with the parent company, Interenergo d.o.o. as subsidiary always received adequate compensation and did not make any legal transactions or take or omit any actions that would be to its detriment. 7 STATEMENT OF MANAGEMENT S RESPONSIBILITY The management hereby confirms the financial statements for the period ended 31 December 2012, the notes thereto on pages 27 to 72, as well as the accounting policies applied. The management is responsible for the preparation of the annual report so that it gives a true and fair view of the financial position of the company and the results of its operations for the period ended 31 December The management hereby confirms that the relevant accounting policies were applied consistently and that the accounting estimates were prepared in compliance with the principles of prudence and due diligence. The management also confirms that the financial statements and the notes thereto were prepared on a going concern basis and in accordance with the applicable legislation and Slovenian Accounting Standards (SAS). Furthermore, the management is responsible for keeping proper accounting records and for taking reasonable measures to safeguard the assets of the company and to prevent and detect fraud and other irregularities. Within five years after the end of the year in which the tax is to be assessed, tax authorities have the right to perform a tax audit, which may consequently lead to additional payments of taxes, late payment interest and fines in relation to the corporate income tax and other taxes and duties. The management is not aware of circumstances that might result in significant liabilities in this respect. Managing Director: Christian Schwarz Managing Director: Anton Papež Ljubljana, 26 April

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27 III. ACCOUNTING REPORT OF INTERENERGO d.o.o. 1 FINANCIAL STATEMENTS 1.1 BALANCE SHEET as at 31 December 2012 Note 31 Dec Dec 2011 ASSETS 57,604,609 41,428,993 A. LONG-TERM ASSETS 26,038,231 7,247,781 I. Intangible assets and long-term deferred costs and accrued revenue 394,958 5, Concessions, patents, licences, trademarks and similar rights 315, Long-term deferred costs and accrued revenue 7,820 5, Long-term deferred development costs 71,890 0 II. Property, plant and equipment ,586,745 27, Manufacturing plant and equipment 2,561, Other plant and equipment 24,989 27,352 IV. Long-term investments ,719,315 6,850, Long-term investments, excluding loans 7,101,315 6,850,293 a) Shares and interests in group companies 7,101,315 6,850, Long-term loans 15,618,000 0 a) Long-term loans to group companies 15,617,000 0 a) Other long-term loans 1,000 0 V. Long-term operating receivables VI. Deferred tax assets , ,780 B. CURRENT ASSETS 10,319,263 20,200,156 III. Short-term investments ,800,000 9,371, Short-term loans 4,800,000 9,371,303 a) Short-term loans to group companies 4,800,000 9,235,440 b) Other short-term loans 0 135,863 IV. Short-term operating receivables ,471,827 9,059, Short-term operating receivables to group companies 944,080 1,441, Short-term trade receivables 1,000,684 3,982, Short-term operating receivables due from others 2,527,063 3,636,296 V. Cash ,047,436 1,768,872 C. SHORT-TERM DEFERRED COSTS AND ACCRUED REVENUE ,247,115 13,981,056 27

28 Note 31 Dec Dec 2011 EQUITY AND LIABILITIES 57,604,609 41,428,993 A. EQUITY ,574,056 16,577,998 I. Called-up capital 10,200,000 10,200, Share capital 10,200,000 10,200,000 II. Capital surplus 7,950,000 7,950,000 III. Revenue reserves 95,721 95, Legal reserves 95,721 95,721 V. Retained earnings or losses -671,665-1,667,723 VI. Net profit or loss for the period 0 0 B. PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUE ,408 0 I. Long-term accrued costs and deferred revenue 3,408 0 C. LONG-TERM LIABILITIES ,800,000 3,900,000 I. Long-term liabilities to group companies 13,800,000 3,900,000 D. SHORT-TERM LIABILITIES 5,435,894 4,950,096 II. Short-term financial liabilities , Short-term liabilities to group companies 0 79, Short-term liabilities to banks III. Short-term operating liabilities ,435,894 4,870, Short-term trade payables 2,383,429 1,212, Other short-term operating liabilities 3,052,465 3,658,916 E. SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUE ,791,251 16,000,899 28

29 1.2 INCOME STATEMENT as at 31 December 2012 Note Net sales ,740, ,755, Revenue generated on the domestic market 41,913,202 20,633, Revenue generated on the foreign market 154,827, ,121, Other operating revenue (including revaluation operating revenue) 88, Costs of goods, materials and services ,732, ,670,400 a) Costs of goods sold and materials used 193,795, ,847,667 b) Costs of materials used 44,480 0 c) Costs of services 892, , Labour costs ,102, ,304 a) Payroll costs 871, ,372 b) Social security costs 105,811 69,621 c) Other social security costs 63,167 60,567 d) Other labour costs 62,236 48, Write-downs in value 463,134 48,744 a) Amortisation and depreciation expense 39,183 9,732 b) Revaluation operating expenses associated with current operating assets ,951 72, Other operating expenses 61,110 94,416 OPERATING PROFIT 469,575 44, Financial revenue from shares and interests ,372 0 a) Financial revenue from shares and interests to group companies 128, Financial revenue from loans , ,192 a) Financial revenue from loans to group companies 643, ,192 b) Financial revenue from loans to others 169, Financial revenue from operating receivables ,009 15,217 a) Financial revenue from operating receivables due from others 7,009 15, Financial expenses due to impairment and write-off of investments , Financial expenses for financial liabilities , ,353 a) Financial expenses for loans received from group companies 354, ,261 b) Financial expenses for loans received from banks 2,647 12,099 c) Financial expenses for other financial liabilities 1, PROFIT FROM ORDINARY ACTIVITIES 1,085,159 8, Other revenue Other expenses TOTAL PROFIT BEFORE TAX 1,058,163 7, Income tax ,538-24, Deferred taxes ,567 23,088 NET PROFIT FOR THE PERIOD 996,058 5,876 29

30 1.3 STATEMENT OF OTHER COMPREHENSIVE INCOME as at 31 December A. Net profit for the period 996,058 5,876 B. Change in revaluation surplus of available-for-sale financial assets 0 0 C. Other components of comprehensive income 0 0 D. Total comprehensive income 996,058 5,876 30

31 1.4 STATEMENT OF CASH FLOWS as at 31 December A. Cash flows from operating activities a) Items of income statement Profit before tax 1,058,163 7,515 Income tax and other taxes not included in operating expenses -62,104-1,639 Adjustments for amortisation / depreciation 39,183 9,732 Adjustments for revaluation operating revenue 0 0 Adjustments fir revaluation operating expenses 0 0 Adjustments for financial revenue -812, ,192 Adjustments for financial expenses 401, ,995 Total items of income statement 623,913 65,411 b) Change in net operating assets balance sheet items Opening less closing operating receivables 4,589,104-7,557,263 Opening less closing deferred costs and accrued revenue -7,266,059-7,594,139 Opening less closing deferred tax assets 26,567-23,088 Closing less opening operating receivables 564,962 2,885,369 Closing less opening accrued costs and deferred revenue 4,790,352 10,710,885 Total change in net operating assets balance sheet items 2,704,926-1,578,236 c) Net cash from operating activities 3,328,839-1,512,825 B. Cash flows from investment activities a) Cash receipts Interests and dividends received from investing activities 297, ,192 Cash receipts from disposal of intangible assets 1,745 0 Cash receipts from disposal of long-term investments 450,000 1,150,000 Cash receipts from disposal of short-term investments 4,571,303 5,847,028 Total cash receipts from investing activities 5,320,428 7,268,220 b) Cash payments Cash payments to acquire intangible assets -391,330 0 Cash payments to acquire property, plant and equipment -2,595,056-19,362 Cash payment to acquire long-term investments -10,869,023 4,989,112 Cash payment to acquire short-term investments -4,800,000-11,558,822 Total cash payments from investing activities -18,655,409-16,567,296 c) Net cash from investing activities -13,334,981-9,299,076 C. Cash receipts from financing activities a) Cash proceeds Cash proceeds from paid-in capital 0 7,500,000 Cash proceeds from increase in long-term financial liabilities 40,400,000 26,400,000 Cash proceeds from increase in short-term financial liabilities Total cash proceeds from financing activities 40,400,000 33,900,125 b) Cash payments Interest paid on financing activities -360, ,642 Cash repayments on long-term financial liabilities -30,500,000-22,500,000 Cash repayments on short-term financial liabilities -254, ,089 Total cash payments from financing activities -31,115,294-23,490,731 c) Net cash from financing activities 9,284,706 10,409,394 D. Closing balance of cash a) net cash inflow or outflow for the period -721, ,507 b) Opening balance of cash 1,768,872 2,171,379 c) Total closing balance of cash 1,047,436 1,768,872 31

32 1.5 STATEMENT OF CHANGES IN EQUITY as at 31 December SHARE CAPITAL CAPITAL SURPLUS REVENUE RESERVES RETAINED EARNINGS OR LOSSES NET PROFIT OR LOSS FOR THE PERIOD TOTAL EQUITY A.1. Balance at 1 January ,200,000 7,950, ,721-1,667, ,577,998 B.2. Total comprehensive income for the period , ,058 a) Net profit for the period , ,058 B.3. Changes in equity , ,058 0 a) Allocation of portion of net profit , ,058 0 C. Balance at 31 December ,200,000 7,950, , , ,574, SHARE CAPITAL CAPITAL SURPLUS REVENUE RESERVES RETAINED EARNINGS OR LOSSES NET PROFIT OR LOSS FOR THE PERIOD TOTAL EQUITY A.1. Balance at 1 January ,200, , ,721-1,673, ,072,122 B.1. Changes in equity 0 7,500, ,500,000 a) Additional paid-in capital 0 7,500, ,500,000 B.2. Total comprehensive income for the period ,876 5,876 a) Net profit for the period ,876 5,876 B.3. Changes in equity ,876-5,876 0 a) Allocation of portion of net profit ,876-5,876 0 C. Balance at 31 December ,200,000 7,950,000 95,721-1,667, ,577, STATEMENT OF ACCUMULATED LOSS as at 31 December 2012 v EUR Net profit for the period 996,058 5,876 + Retained earnings or losses -1,667,723-1,673,599 + Decrease in revenue reserves 0 0 Increase in revenue reserves 0 0 = Accumulated loss -671,666-1,667,723 Accounting policies are a constituent part of the financial statements. 32

33 2 ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.1 Basis for the preparation of financial statements The financial statements of the Company are prepared in accordance with the Slovenian Accounting Standards (SAS 2006) and the Companies Act, using the accrual and going concern fundamental assumptions. The qualitative accounting characteristics are understandability, relevance, reliability, and comparability. The same accounting policies were applied as in the previous reporting period. Assets and liabilities expressed in a foreign currency are translated to the local currency as at the balance sheet date by applying the reference exchange rate of the ECB. Related parties The Company accounts for following shares and interests in subsidiaries, which together with the parent company constitute form the Group: Interenergo d.o.o. Zagreb - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; Interenergo d.o.o. Sarajevo - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; PLC Interenergo d.o.o. Beograd - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; Interenergo Makedonia d.o.o.e.l. - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; EHE d.o.o. Banja Luka - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; IEP energija d.o.o. Gornji Vakuf Uskoplje - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; Hidrowatt d.o.o. Beograd owned by PLC Interenergo d.o.o., holding an 80% equity stake; IE Electric d.o.o. Banja Luka - owned by Interenergo d.o.o. Ljubljana, holding a 27% equity stake; Inter-Energo d.o.o. Gornji Vakuf Uskoplje - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; LSB Elektrane d.o.o. Banja Luka - in sole ownership (100%) of Interenergo d.o.o. Ljubljana; Inter-Hem d.o.o. Banja Luka - in sole ownership (100%) of Interenergo d.o.o. Ljubljana. The financial statements for the period from 1 January 2012 to 31 December 2012 were approved by the management on 26 April Consolidated financial statements for the Interenergo Group are available at the registered office of Interenergo d.o.o. The consolidated financial statements for the widest Group of companies are available at the headquarters of the company, i.e. KI-KELAG INTERNATIONAL GMBH, Arnulfplatz 2, Postfach 176, Klagenfurt, Austria. Financial statements The fundamental financial statements include: the balance sheet, which shows the value of assets and liabilities at the end of the financial year, the income statement, which shows revenue and expenses, as well as its profit or loss for the financial year, the statement of other comprehensive income, the statement of cash flows, which shows the change in cash over the reporting period, and the statement of changes in equity, which shows changes in equity components in the financial year. The cash flow statement has been prepared in the abbreviated form of the format II. Theoretically possible items that are not relevant to a specific entity are not presented. Revenue of any type was offset against expenses of any type apart from depreciation or amortisation. Instead of these items, profit or loss before tax is included as a new line item in cash flows from operating activities. However, profit or loss before tax as well as income taxes has been adjusted for depreciation and other non-monetary items, and the items whose monetary effects result in cash flows from investing and financing activities. In addition, changes during the period in net operating assets in the balance sheet items (including accruals and deferrals) have been taken into account. 33

34 Information about major line items (cash receipts and cash payments) of the cash flow statement has been obtained: a) by adjusting operating revenue and operating expenses, as well as financial revenue from operating receivables and financial expenses for operating liabilities from the income statement, including changes in current operating assets, accruals and deferrals, provisions and deferred taxes during the period; b) from the Company s books of account (regarding cash flows from financing activities). 2.2 Summary of significant accounting policies Intangible assets and long-term deferred costs and accrued revenue Intangible assets include concessions, patents, licences, trademarks and similar rights relating to easement of roofs, where the solar power stations are installed. Long-term deferred costs and accrued revenue include longterm deferred costs. Property, plant and equipment The item of property, plant and equipment includes mostly computer and other equipment. An item of property, plant and equipment shall be recognised in the books of account if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. Upon initial recognition, the cost of an asset comprises its purchase price, including import duties and any directly attributable costs of bringing the asset to the condition necessary for its intended use. Subsequent expenditure on an item of property, plant and equipment increases its cost if it increases its future economic benefits in excess of the originally assessed. Items of property, plant and equipment are depreciated individually, using the straight-line method without considering the remaining value. In 2012, the Company applied the following depreciation/amortisation rates: Solar power plants 6,67 % Computers and computer equipment 50 % Other equipment 20 % An item of property, plant and equipment shall be derecognised in the books of account and in the balance sheet on its disposal or when no future economic benefits are expected from its use or disposal. Difference between the net profit on disposal and the carrying amount of the disposed item of property, plant and equipment is included in the income statement. While assessing whether there is any indication that an asset may be impaired, the Company at each reporting date considers following: possible evidence that the economic efficiency of the asset was lower; evidence on the asset's obsolescence or damage; significant changes to the scope or manner of present or expected use of asset have occurred or are expected in near future having a negative impact on the company. These changes include non-use of the asset, plans on halting or reorganising operations, of which the asset is part of, or sale of the asset before the expected date. As for the books of account, the cost is disclosed separately and the same applies to accumulated depreciation; the balance sheet, however, discloses solely the carrying amount. Investments Long-term investments comprise investments in subsidiaries. On initial recognition, long-term investments are measured at cost. The cost of a long-term investment is increased by the transaction costs directly attributable to its acquisition or issue. At each reporting date, the Company assesses whether there is any indication that an investment in subsidiaries may be impaired. The assessments of investments are prepared on the basis of discounted cash flows taking account of the ratios on the level of the Kelag or RWE Group. The assessment of indicators on a possible impairment is carried out on an annual basis. If there is indication of impairment, the recoverable amount is determined, representing the higher of fair value and value in use. If there is objective evidence that an impairment loss has been incurred on an item of investments, impairment is recognised in the income statement under financial expenses. Short-term investments include loans extended and initially recognised at fair value. As at the reporting date, they are carried at amortised cost. At each reporting date, the Company assesses whether there is any indication that the investments may be impaired. To account for any required impairments, loans are categorised into groups with similar credit risk levels. The Company extends loans to subsidiaries for the purpose of financing the construction of small hydroelectric power plants. 34

35 Operating receivables Operating receivables are initially recognised at amounts recorded in the relevant documents, under the assumption that they will be recovered. Receivables are revalued for impairment if their carrying amount exceeds their fair value. Receivables believed not to be settled by their due date or in their full amount are considered as doubtful receivables or, in the case of litigation, as disputable receivables; allowances are formed for such receivables and charged against revaluation operating expenses. To account for impairment, receivables are categorised into groups with similar credit risk levels, based on their maturity. Allowances for receivables are formed individually by taking into account management s assessment that is made based on previous experiences. Cash Cash comprises cash on hand, bank balances and cash equivalents. Cash equivalents are short-term deposits with banks and call deposits with a maximum maturity of up to three months. Deferred costs and accrued revenue Deferred costs and accrued revenue comprise short-term deferred costs or expenses and short-term accrued revenue. They are disclosed separately and classified into major categories. They mostly refer to services referring to the sale of electricity that had already been rendered in the reporting period but not yet invoiced. Deferred costs and accrued revenue are disclosed in amounts recorded in the relevant documents evidencing their accrual. Equity Total equity comprises called-up capital, capital surplus, revenue reserves, and retained earnings or retained losses. The share capital and capital surplus are disclosed in the amount of contributions in cash and in kind received by the company, and on a transitional basis in the amount of receivables due from subscribers to shares; the value of contributions in kind is measured at fair value. Total comprehensive income for the period consists of the net profit or loss for the period and other comprehensive income that includes items of revenue and expenses not recognised in the profit or loss. Financial liabilities Financial liabilities are loans and borrowings received based on loan contracts. Financial liabilities are either longterm if they are to be repaid in a period longer than one year, or short-term. Financial liabilities are initially recognised at the amounts arising from the relevant documents, which evidence the receipt of cash or the settlement of other liability. After recognition they are measure at amortised cost by using the effective interest rate method. Operating liabilities operating liabilities are supplier credits for goods or services purchased, payables to employees for their work performed, and liabilities to the state arising from taxes, including the value added tax payable. A specific class of operating liabilities are liabilities to customers arising from advances and short-term collaterals received. Operating liabilities are either long-term if they are to be settled in a period longer than one year, or short-term liabilities, which include those already due (but not yet settled) and those due within the period of one year. They are initially recognised at amounts recorded in the relevant documents that prove the receipt of products or services or work performed, or the accounted costs or expenses in the reporting period. Accrued costs and deferred revenue Short-term accrued costs and deferred revenue comprise short-term accrued costs or expenses and short-term deferred revenue. They are recognised separately and classified into major categories. They mostly refer to the services related to the sale of electricity, for which no invoices were yet received by the end of the reporting year. The revenue and expenses incurred in the sale and purchase of electric energy are accrued on the basis of the past trading results. Operating expenses are accrued on the basis of information relating to the previous months. 35

36 Revenue Revenue is recognised if it is possible that increases in economic benefits shall occur and those increases can be measured reliably. Revenue is classified into operating revenue, financial revenue and other revenue. Operating revenue and financial revenue are ordinary revenue. Operating revenue comprises revenue from sale of electricity and electrical capacities and other operating revenue associated with products and services. Financial revenue is revenue generated by investment activities. It arises in relation to investments, as well as in relation to receivables. Sales revenue shall be recognised when the entity has transferred to the buyer the significant risks and rewards of ownership; the amount of revenue can be measured reliably; when it is probable that economic benefits associated with the transaction will flow to the entity; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. The Company is engaged in wholesale of electricity. Revenue generated on sale of electricity are recognised when the electricity is supplied to the wholesale dealer and the contractually-agreed place of supply, and all the risks are transferred from seller to buyer. Expenses Expenses shall be recognised if decreases in economic benefits during the accounting period are associated with decreases in assets or increases in liabilities and such decreases can be measured reliably. Expenses are classified as operating expenses, financial expenses and other expenses. Operating expenses and financial expenses are ordinary expenses. Financial expenses include financing expenses and investment expenses. The former primarily comprise interest paid, while the latter predominantly have the nature of revaluation financial expenses. The Company is engaged in wholesale of electricity. Expenses are recognised when the electricity is received at the contractually-agreed place of supply, and all the risks are transferred from seller to buyer. Revaluation operating expenses arise in connection with current assets as a result of their impairment. Costs of materials and services Costs of materials and services include expenses incurred in connection with materials and services. Labour costs Labour costs include wages and salaries earned by employees, in their gross amount; compensations to which the employees are entitled under the law, collective bargaining agreement or employment contracts for the period of absence from work, and which an entity is obliged to cover in their gross amounts; and taxes and contributions additionally accrued on these items and charged against the employer. Labour costs shall be recognised on the basis of documents evidencing the work performed and on other accounting bases used to calculate the gross amounts of wages and. Income tax Current tax liabilities (assets) for the current and prior financial years are measured at the amount expected to be paid or recovered from the taxation authorities, using the tax rates enacted as at the balance sheet date. Deferred taxes Deferred tax assets and deferred tax liabilities are accounted for using the liability method. Only those deferred tax assets and liabilities are recognised which derive from temporary differences. A deferred tax asset is recognised also for unused tax losses and tax credits, which are transferred to the next financial year if it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. At each balance sheet date an entity reassesses deferred tax assets and reduces or impairs a part of the deferred tax asset if it is no longer probable that sufficient taxable profit will be available to allow the unused tax losses to be utilised. Deferred tax assets are not discounted. Deferred tax assets or deferred tax liabilities are measured using the tax rates expected to be used when the asset is realised or the liability settled. In this relation, the company uses tax rates enacted as at the balance sheet date. 36

37 2.3 Notes to the financial statements Intangible assets and property, plant and equipment 31 Dec Dec 2011 Intangible assets and long-term deferred costs and accrued revenue 394,958 5, Concessions, patents, licences, trademarks and similar rights 315, Long-term deferred costs and accrued revenue 7,820 5, Other development costs 71,890 0 The item of concessions, patents, licences, trademarks and similar rights includes the easement for using the roofs to install the solar power stations (the period of the easement is 15 years). Long-term development costs refer to development and implementation of the new trading system. Movement in intangible assets in Cost Long-term deferred costs and accrued revenue Intangible assets Intangible assets being acquired Balance at 1 Jan ,406 33, ,656 Additions 2, ,440 71, ,744 Disposals Balance at 31 Dec , ,690 71, , Accumulated amortisation Balance at 1 Jan , ,250 Total Amortisation 0 4, ,192 Disposals Balance at 31 Dec , , Carrying amount Balance at 1 Jan , ,406 Balance at 31 Dec , ,248 71, ,958 Movement in intangible assets in 2011 Intangible assets 1. Cost Balance at 1 Jan ,250 Additions 0 Disposals 0 Balance at 31 Dec , Accumulated amortisation Balance at 1 Jan ,831 Amortisation 3,419 Disposals 0 Balance at 31 Dec , Carrying amount Balance at 1 Jan ,419 Balance at 31 Dec

38 31 Dec Dec 2011 Property, plant and equipment 2,586,745 27, Manufacturing plant and equipment 2,561, Other plant and equipment 24,989 27,352 Manufacturing plant relates to two solar power stations, which were installed in The first was installed in Volčja draga at the Martex building, whereas the other solar power station at the Mura building in Murska Sobota. Both solar power plants are insured and none of them is pledged under mortgage. The item of other plant and equipment refers to computer and office equipment. Movement in property, plant and equipment in Cost Other plant and equipment Solar power stations Total Balance at 1 Jan , ,972 Additions 6,882 2,588,174 2,595,056 Disposals Balance at 31 Dec ,015 2,588,174 2,643, Accumulated depreciation Balance at 1 Jan , ,614 Depreciation 8,580 26,418 34,998 Disposals Balance at 31 Dec ,026 26,418 29, Carrying amount Balance at 1 Jan , ,359 Balance at 31 Dec ,989 2,561,756 2,586,745 Movement in property, plant and equipment in 2011 Other plant and equipment 1. Cost Balance at 1 Jan ,045 Additions 19,343 Disposals -2,416 Balance at 31 Dec , Accumulated amortisation Balance at 1 Jan ,723 Amortisation 6,313 Disposals -2,416 Balance at 31 Dec , Carrying amount Balance at 1 Jan ,322 Balance at 31 Dec ,352 38

39 2.3.2 Long-term investments 31 Dec Dec 2011 Long-term investments 22,719,315 6,850,293 Long-term investments excluding loans 7,101,315 6,850,293 Other loans 15,618,000 0 Shares and interests in Group companies refer to following investments in subsidiaries: EHE d.o.o., Banja Luka, Bosnia and Herzegovina 1,620,000 1,620,000 Interenergo d.o.o., Sarajevo, Bosnia and Herzegovina 399, ,105 IEP energija d.o.o., Gornji Vakuf Uskoplje, Bosnia and Herzegovina 3,989,489 3,989,489 IE electric d.o.o., Banja Luka, Bosnia and Herzegovina LSB Elektrane d.o.o. Banja Luka, Bosnia and Herzegovina 400,000 0 Inter Hem d.o.o., Banja Luka, Bosnia and Herzegovina 100,000 0 Inter-Energo d.o.o. Gornji Vakuf Uskoplje, Bosnia and Herzegovina 1,022 0 Interenergo d.o.o., Zagreb, Croatia 0 0 Interenergo Makedonija d.o.o.e.l., Macedonia 8,613 8,613 PLC Interenergo d.o.o., Beograd, Serbia 582, ,626 Total 7,101,315 6,850,293 In 2012, the companies LSB Elektrane d.o.o. Banja Luka, Inter-Hem d.o.o. Banja Luka, and Inter-Energo d.o.o. Gornji Vakuf Uskoplje were acquired. The company PLC Interenergo paid back a part of subsequently paid in capital, thus the investment in this company was decreased. The controlling company Kelag carried out impairment testing by applying the method, which is used on the Group level. Impairment testing is based on the discounted cash flow method, taking into account the required rate of yield on the investment in the hydro-electric plant, and adjusted for the local risk. Impairment testing was conducted for the companies EHE d.o.o. (power plant Novakovići), Hidrowatt d.o.o. (power plant Poštica), IEP energija d.o.o. Gornji Vakuf Uskoplje (power plants Duboki potok and Sastavci), and Inter-Energo d.o.o. Gornji Vakuf Uskoplje. According to analyses, no impairment of contributions is required. 31 Dec Dec 2011 Long-term loans 15,618,000 0 Long-term loans to group companies 15,617,000 0 Other long-term loans 1,000 0 Long-term loans were extended to subsidiaries and bear interest at the market interest rate. The loans to group companies are not secured. In 2012, new long-term loan contracts were concluded with following companies: EHE d.o.o., Banja Luka, Interenergo d.o.o., Sarajevo, Interenergo d.o.o., Zagreb, Interenergo Makedonija d.o.o.e.l., LBS Elektrane d.o.o. Banja Luka, and Inter-Hem d.o.o., Banja Luka. Long-term loans extended are not exposed to interest rate risk as the loans bear fixed interest rates, whereas the change of the market interest rates has no impact on the loans. The interest rate risk is normally accompanied also by the credit risk in terms of debtor s failure to settle his liabilities. In addition to repayments of the principal, the Company discloses also the interest receivables which shall be repaid in 2013, when inflows from the power plant s operations will be recorded. Loans extended are not deemed as collateral for the Company s liabilities. The Company recorded no long-term operating receivables at the year-end of

40 2.3.3 Deferred tax assets 31 Dec Dec 2011 Deferred tax assets 337, ,780 Deferred tax assets increased in 2012 as a result of tax non-deductible expenses associated with the impairment of receivables, and decreased by non-deductible expenses referring to receivables, which upon the conclusion of the payment out of the estate in Poteza d.d. became deductible. The net effect of the deferred tax assets in the financial year amounted to EUR -26, Short-term investments 31 Dec Dec 2011 Short-term loans 4,800,000 9,371,303 Short-term loans to group companies 4,800,000 9,235,440 Other short-term loans 0 135,863 Short-term loans to group companies include a loan extended to a subsidiary. The loan bears the market interest rate and is not secured. Interest together with the principal amount is due at the year-end of Short-term loans extended are not exposed to interest rate risk, as the interest rates are fix and the change in the market interest rates has no impact on the loans granted. In addition to the interest rate risk, loans are exposed to credit risk in terms that the debtor shall not settle his liabilities Short-term operating receivables 31 Dec Dec 2011 Short-term operating receivables 4,471,827 9,059,981 Short-term operating receivables due from group companies 944,080 1,441,530 Short-term trade receivables 1,000,684 3,982,155 Short-term operating receivables due from others 2,527,063 3,636,296 undue Maturity in 2012 due up to 90 days due in excess of 180 days Short-term operating receivables due from group companies 944, ,080 Short-term trade receivables 591, ,951 1,000,684 Short-term operating receivables due from others 2,527, ,527,063 Short-term receivables due from group companies amounted to EUR which refer to receivables due from the controlling company Kelag EUR (2011:0) and EUR to the companies in Interenergo Group. The item of short-term trade receivables comprises trade receivables, advance payments for trading on the energy stock exchange, advance payments to domestic companies, and advance payments for future investments. Shortterm operating receivables due from others include mostly receivables due from input VAT and other receivables due from the state. In 2012, the Company formed allowances for trade receivables in the amount of EUR 408,951 (2011: EUR 72,864). The Company recorded no receivables due from members of the management, members of the supervisory board or internal owners as at 31 December Total 40

41 2.3.6 Cash 31 Dec Dec 2011 Cash 1,047,436 1,768,872 Bank balances 32, ,137 Cash on electricity trading bank accounts 1,014,772 1,527,735 Company s overdraft coverage on the bank account at the UniCredit Bank d.d. is set at EUR 1.5 million and used for current operations Short-term deferred costs and accrued revenue 31 Dec Dec 2011 Short-term deferred costs and accrued revenue 21,247,115 13,981,056 Short-term deferred costs 26,054 68,201 Deferred revenue due from customers 16,843,350 8,734,364 Deferred revenue due from Interenergo d.o.o. Zagreb 1,105,868 1,316,403 Deferred revenue due from PLC Interenergo d.o.o. Belgrade 482, ,470 Deferred revenue due from Kelag 2,760,717 3,021,618 Deferred revenue due from Interenergo d.o.o. Sarajevo 24,000 0 Deferred revenue due from EHE d.o.o. Banja Luka 5,000 0 At the end of 2012, the Company recorded sales revenue from December that had not yet been invoiced. As a rule, the Company issues an invoice to its customers at the beginning of the month following the sale, and the due date is usually on the 20th day of the following month (pursuant to the EFET standard contract). Short-term deferred costs and accrued revenue record a major increase as a result of Company s increased operations. The revenue not yet invoiced refers to the sales generated on the domestic market and abroad, and to the sales to group companies in December Accruals were made on the basis of the realized trading results recorded in the trading system. Short-term deferred costs refer to the purchase of capacities for the coming financial year, annual subscriptions and insurances Equity 31 Dec Dec 2011 Equity 17,574,056 16,577,998 Share capital 10,200,000 10,200,000 Capital surplus 7,950,000 7,950,000 Legal reserves 95,721 95,721 Retained earnings or losses -671,665-1,667,723 Net profit or loss for the period 0 0 The net profit for 2012 was allocated to cover retained losses from previous periods as required under the Companies Act. Legal reserves were formed on the basis of the profit for 2007 decreased by the coverage of retained earnings from 2006 (EUR 5,998 minus EUR 236 equals EUR 5,762), and of the profit for 2008 (EUR 89,959). Profit for 2010 and 2011 was used for the coverage of retained losses. In 2011, additional capital surplus was paid in. This capital surplus is earmarked partly for financing the working capital used in electricity trading and partly for financing the subsidiaries, where investments in renewable energy resources are being carried out. Taking into account the revaluation of the opening balance of equity (EUR ,998), restated by the use of the cost-of-living index (2012: 2.7 %), equity should be increased by EUR 447,606 to account for maintaining its purchasing power (opening balance of equity * % cost-of-living index). Thus, the adjusted result for the period would correspond to EUR 548,454 (profit for the period minus increase in equity) ((opening balance of equity * % cost-of-living index) +/- profit or loss for the period). 41

42 2.3.9 Provisions and long-term accrued costs and deferred revenue 31 Dec Dec 2011 Long-term accrued costs and deferred revenue 3,408 0 Long-term accrued costs and deferred revenue include long-term accruals for the bonuses paid to employees in the trading department Long-term financial liabilities 31 Dec Dec 2011 Long-term financial liabilities to group companies 13,800,000 3,900,000 Long-term financial liabilities to group companies represent the loan extended by the parent company KI-KELAG International GmbH in the amount of EUR 13,800,000. The said loan, which bears the market interest rate, is not secured and matures at the end of The loan is earmarked for investments in renewable energy projects, mainly small hydro power plants and to provide for liquidity in trading with electricity Short-term financial liabilities 31 Dec Dec 2011 Short-term financial liabilities 0 79,153 Short-term financial liabilities to group companies 0 79,028 Short-term financial liabilities to banks The Company recorded no financial liabilities as at the year-end of Short-term operating liabilities 31 Dec Dec 2011 Short-term operating liabilities 5,435,894 4,870,943 Short-term trade payables 2,383,429 1,212,027 Other short-term operating liabilities 3,052,465 3,658,916 In 2012, Interenergo d.o.o. recorded no operating liabilities to group companies, whereas short-term liabilities in the amount of EUR 479,102 EUR (2011: EUR 10,831) were recorded to the controlling company Kelag. Short-term trade payables include liabilities to domestic and foreign suppliers. Other short-term operating liabilities comprise liabilities from advances, liabilities to the state, payables to employees, and other liabilities. As at the balance sheet date, no overdue liabilities are recorded Short-term accrued costs and deferred revenue 31 Dec Dec 2011 Short-term accrued costs and deferred revenue 20,791,251 16,000,899 Short-term accrued costs 177, ,889 Accrued costs of electricity 10,306,514 13,581,123 Accrued costs of purchasing electricity - IE Zagreb 4,094, ,211 Accrued costs of purchasing electricity - Kelag 4,801,365 1,769,676 Accrued costs of purchasing electricity - IE PLC 1,335,085 0 Accrued costs of wages and salaries 73,149 0 Accrued costs of wages and salaries - trading 3,408 0 The Company formed short-term accrued costs and deferred revenue in December 2012 to the account for accrued costs. As the Company significantly increased the operations, the cost of the purchased electricity as well as short-term accrued costs and deferred revenue also went up at the year-end. Accruals were made on the basis of the realized trading results recorded in the trading system. Operating costs were accrued on the basis of information referring to the past months. 42

43 Net sales Net sales 196,740, ,755,314 Net sales generated in Slovenia 41,913,202 20,633,794 Net sales generated in the EU (except in Slovenia) 134,811, ,442,578 Net sales generated outside the EU 20,015,435 18,678,942 In 2012, revenue in the amount of EUR 20,015,435 (2011: EUR 18,678,942) were generated by the Company from transactions with group companies and EUR 24,213,955 (2011: EUR 32,589,234) from transactions with the controlling company Kelag Costs of goods, materials and services Costs of goods, materials and services 194,732, ,670,400 Costs of goods and materials sold 193,795, ,801,968 Costs of materials used 44,480 45,699 Costs of services 892, ,733 Costs of goods and materials sold refers to the amount of purchased electricity, whereof in 2012 electricity in the amount of EUR 22,440,159 (2011: EUR 18,254,788) was purchased from group companies and in the amount of EUR 50,404,403 (2011: EUR 27,299,908) from the controlling company Kelag. Costs of services include following: Professional and personal services 234, ,882 Reimbursements of work-related costs to employees 22,612 23,461 Leases and rentals 114,886 92,921 Other services 520,587 92,921 Total costs of services 892, ,733 In 2012, the fee of the auditor amounted to EUR 15,653 (2011: EUR 15,540) and includes the auditing of the annual report and the consolidated financial statements Costs by function Costs of goods sold 193,795, ,801,968 Selling expenses 446, ,216 Costs of general and administrative services 446, ,216 Total costs by function 194,732, ,670, Labour costs Labour costs 1,102, ,304 Payroll costs 871, ,372 Pension insurance costs 105,811 69,621 Social insurance costs 63,167 60,567 Other labour costs 62,236 48,744 As at 31 December 2012, the Company recorded 20 full-time employed staff. The average number of employees based on working hours was recorded at (2011:14.29) in the reporting period. 43

44 Structure of employees in terms of their education EDUCATIONAL STRUCTURE No. of employees at 1 Jan 2012 Leavers / new entrants No. of employees at 31 Dec 2012 Percentage secondary school education % high school education % university education % master's degree % TOTAL % Total remuneration paid to groups of persons: 577, ,942 Members of the management and holder of procuration 232, ,355 Other employees under individual contracts 344, , Revaluation operating expenses Revaluation operating expenses associated with current operating assets ,951 72,864 Revaluation operating expenses associated with current operating assets comprise revaluation operating expenses in the amount of EUR 423,951 (2011: EUR 72,864), which include allowances for receivables due by a foreign legal Financial revenue Financial revenue 947, ,409 Financial revenue from shares and interests in group companies 128,372 0 Financial revenue from loans to group companies 643, ,192 Financial revenue form loans to others 169,008 0 Financial revenue from operating receivables 7,009 15,217 Financial revenue from shares and interests represent dividends received from Interenergo d.o.o. Zagreb. Financial revenue from loans includes interest on loans extended to group companies. Financial revenue from operating receivables refers to interest received in connection with deposits and collaterals granted Financial expenses Financial expenses 359, ,975 Financial expenses due to impairment and write-offs of investments ,622 Financial expenses for loans from group companies 354, ,261 Financial expenses for loans from banks 2,647 12,099 Financial expenses for other financial liabilities 1, Financial expenses for financial liabilities refer to interest paid on loans that were extended by the controlling company KI Kelag in the amount of EUR 355,894 (2011: EUR 174,261) and to interest on the negative bank balances in the amount of EUR 2,647 (2011: EUR 12,099). 44

45 Current and deferred taxes Profit before tax 1,058,163 7, Adjustment of revenue to account for tax qualifying expenses -336, Adjustment of expenses to account for tax qualifying expenses 473, , Utilised tax benefits -1,067,114-32, Utilised tax losses 0-87,690 Total tax base 134, ,637 Income tax -35,538-24,727 Deferred taxes -26,567 23,088 The legally defined and applied tax rate for 2012 was 18%. The taxable base on which current income tax is paid, amounted to EUR 134,768. The effective tax rate was recorded at 5.87% (2011: 21.8%). In 2012, the Company completed two investments in solar power plants and consequently enforced a 40% tax relief for investments, which resulted in a lower effective tax rate. The effective tax rate =(income tax + deferred taxes) / profit or loss before tax Contingent liabilities The Company does not record contingent liabilities that would not have been included in the balance sheet as at 31 December For the purpose of trading, the Company issued bank guarantees to the companies CAO Central Allocation Office GmbH, Amprion GmbH, BSP Regional Energy Exchange LLC, APCS Power Clearing and Settlement AG. The Company issued also parent company guarantee to RWE Supply & Trading GmbH and E. On Energy SE. For the purpose of investing, the Company issued a bank guaranty in the total amount of EUR to the company Rosewood d.o.o. Group companies i.e. EHE d.o.o Banja Luka, LSB elektrane d.o.o., Inter-Hem d.o.o., and PLC IE d.o.o. have issued guarantees to the Serbian government and the public institution Javno preduzeće Elektroprivrede Srbije in the amount of EUR 559, Events after the balance sheet date No events have occurred after the reporting period that would have an impact on the Company s financial statements for Managing Director: Christian Schwarz Managing Director: Anton Papež Ljubljana, 26 April

46 46

47 3 INDEPENDENT AUDITOR S REPORT 47

48 INTERENERGO GROUP 48

49 IV. ACCOUNTING REPORT OF THE INTERENERGO GROUP 1. CONSOLIDATED FINANCIAL STATEMENTS 1.1 CONSOLIDATED BALANCE SHEET as at 31 December 2012 ASSETS Note 31 Dec Dec ,181,147 42,242,434 A. LONG-TERM ASSETS 30,332,711 14,940,337 I. Intangible assets and long-term deferred costs and accrued revenue ,583, , Concessions, patents, licences, trademarks and similar rights 1,977, Goodwill 448, Long-term deferred development costs 71, Advances for intangible assets 77, , Long-term deferred costs and accrued revenue 7,820 5,406 II. Property, plant and equipment ,335,587 13,733, Land 77, Buildings 3,164, , Manufacturing plant and equipment 23,373,357 4,490, Property, plant and equipment being acquired 692,574 8,063, Advances for property, plant and equipment 27,510 1,020,213 IV. Long-term investments ,460 46, Long-term investments, excluding loans ,898 c) Other shares and interests d) Other long-term investments 1,000 46,438 V. Long-term operating receivables , Long-term operating receivables due from others 46, VI. Deferred tax assets , ,089 B. CURRENT ASSETS 10,063,174 15,092,472 III. Short-term investments , Short-term loans 0 367,939 a) Short-term loans to others 0 367,939 IV. Short-term operating receivable ,919,926 11,829, Short-term trade receivables 3,183,695 4,261, Short-term operating receivables due from others 4,736,231 7,568,680 V. Cash ,143,247 2,894,834 C. SHORT-TERM DEFERRED COSTS AND ACCRUED REVENUE ,785,262 12,209,625 49

50 Note 31 Dec Dec 2011 EQUITY AND LIABILITIES 60,181,147 42,242,434 A. EQUITY ,001,676 15,756,434 I. Called-up capital 10,200,000 10,200, Share capital 10,200,000 10,200,000 II. Capital surplus 7,950,000 7,950,000 III. Revenue reserves 95,722 95, Legal reserves 95,722 95,722 V. Retained earnings or losses -2,227,292-2,485,079 VI. Net profit or loss for the period 0 0 VII. Consolidated equity adjustment -49,242-10,012 VIII. Minority interest 32,488 5,803 C. LONG-TERM LIABILITIES 16,260,308 3,910,384 I. Long-term financial liabilities ,800,000 3,900,000 II. Long-term operating liabilities ,460,308 10, Other long-term operating liabilities 2,460,308 10,384 D. SHORT-TERM LIABILITIES 12,534,948 6,480,131 II. Short-term financial liabilities ,232 1, Short-term financial liabilities to banks Other short-term financial liabilities 18,232 1,074 III. Short-term operating liabilities ,516,716 6,478, Short-term operating liabilities to group companies 0 10, Short-term trade payables 8,222,043 1,998, Other short-term operating liabilities 4,294,673 4,469,959 E. SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUE ,384,215 16,095,485 50

51 1.2 CONSOLIDATED INCOME STATEMENT as at 31 December 2012 Note Net sales ,230, ,012, Capitalised own products , , Other operating revenue (including revaluation operating revenue) , , Costs of goods, materials and services ,716, ,784,652 a) Costs of goods sold and materials used -192,301, ,378,049 b) Costs of services -1,415,148-1,406, Labour costs ,270, ,242 a) Payroll costs -1,041, ,613 b) Social security costs -74,679-60,567 c) Other social security costs -105,811-84,009 d) Other labour costs -48,476-54, Write-downs in value , ,186 a) Amortisation and depreciation expense -145,843-61,230 c) Revaluation operating expenses associated with current operating assets -432,445-92, Other operating expenses , ,671 OPERATING PROFIT 492, , Financial revenue from loans ,015 36,748 b) Financial revenue from loans to others 235,015 36, Financial revenue from operating receivables 0 0 b) Financial revenue from operating receivables due from others Financial expenses due to impairment and write-offs of investments , Financial expenses for financial liabilities , ,439 a) Financial expenses for financial liabilities to group companies -354, ,261 d) Financial expenses for other financial liabilities -62,072-12, Financial expenses for operating liabilities 0 0 c) Financial expenses for other operating liabilities 0 0 PROFIT FROM OPERATING ACTIVITIES 310, ,923 TOTAL PROFIT 310, , Income tax ,505-70, Deferred taxes -6,936 31,462 NET PROFIT FOR THE PERIOD 258, ,649 Of which attributable to: equity holders of the parent 247, ,017 minority interest 10,798 4,632 51

52 1.3. CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME as at 31 December NET PROFIT FOR THE PERIOD 247, ,649 Profits and losses arising from the translation of financial statements of group companies (effect of changes in foreign exchange rates) -49,242-14,728 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 198, ,921 a) Total comprehensive income attributable to equity holders of the parent 187, ,289 b) Total comprehensive income attributable to minority interest 10,798 4,632 52

53 1.4. CONSOLIDATED STATEMENT OF CASH FLOWS as at 31 December 2012 A. Cash flows from operating activities a) Items of income statement Profit or loss before tax 310, ,923 Income tax and other taxes not included in operating expenses -62,441-39,274 Adjustments for amortisation / depreciation 145,843 61,230 Adjustments for revaluation operating revenue 0 0 Adjustments for revaluation operating expenses 0 92,956 Adjustments for financial revenue -391,214-36,748 Adjustments for financial expenses 212, ,061 Total items of income statement 214, ,148 b) Changes in net operating assets in balance sheet items Opening less closing operating receivables 3,864,411-5,716,810 Opening less closing deferred costs and accrued revenue -7,575,637-8,430,935 Opening less closing deferred tax assets 6,936-28,691 Closing less opening operating receivables 6,037, ,552 Closing less opening accrued costs and deferred revenue -711,270 12,458,631 Closing less opening deferred tax liabilities 0 0 Total changes in net operating assets in balance sheet items 1,622,225-1,328,253 c) Net cash from operating activities 1,836, ,105 B. Cash flows from investing activities a) Cash receipts from investing activities Interests and dividends received from investing activities 0 36,748 Cash receipts from disposal of intangible assets 0 0 Cash receipts from disposal of property, plant and equipment 45,438 1,915,235 Cash receipts from disposal of short-term investments 367,939 0 Total cash receipts from investing activities 413,377 1,951,983 b) Cash payments for investing activities Cash payments to acquire intangible assets -1,981, ,852 Cash payments to acquire property, plant and equipment -13,212,462-6,871,830 Cash payment to acquire long-term investments 0-3,989,489 Total cash payments for investing activities -14,826,338-11,641,171 c) Net cash used in investing activities -14,780,900-9,689,188 C. Cash flows from financing activities a) Cash proceeds from financing activities Cash proceeds from paid-in capital 0 7,500,000 Cash proceeds from increase in long-term financial liabilities 42,849,924 3,900,000 Cash proceeds from increase in short-term financial liabilities 0 0 Total cash proceeds from financing activities 42,849,924 11,400,000 b) Cash payments from financing activities Interest paid on financing activities 0-186,636 Cash repayments of long-term financial liabilities -30,500,000 0 Cash repayments of short-term financial liabilities -157, ,083 Total cash payments for financing activities -30,657, ,719 c) Net cash used in financing activities 12,192,635 10,412,281 D. Closing balance of cash a) Net cash inflow or outflow for the period -751, ,988 b) Opening balance of cash 2,894,834 2,605,846 c) Total closing balance of cash 2,143,247 2,894,834 53

54 1.5. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY as at 31 December () SHARE CAPITAL CAPITAL SURPLUS REVENUE RESERVES RETAINED EARNINGS OR LOSSES NET PROFIT OR LOSS FOR THE PERIOD CONSOLIDATED EQUITY ADJUSTMENT EQUITY HOLDERS OF THE PARENT MINORITY INTEREST TOTAL EQUITY A.1. Balance at 1 Jan ,200,000 7,950,000 95,722-2,485, ,012 15,750,023 5,803 15,755,826 B1. Changes in equity transactions with owners d.) Additional paid-in capital B.2. Total comprehensive income for the period ,395-39, , ,165 a) Net profit for the period , , ,395 c) Consolidated equity adjustment ,230-39, ,230 B.3. Changes within equity , , ,685 26,685 b) Settlement of loss as a deduction component of equity , , ,685 0 C. Balance at 31 Dec ,200,000 7,950,000 95,722-2,227, ,242 15,750,631 32,488 16,001,676 54

55 2011 () SHARE CAPITAL CAPITAL SURPLUS REVENUE RESERVES RETAINED EARNINGS OR LOSSES NET PROFIT OR LOSS FOR THE PERIOD CONSOLIDATED EQUITY ADJUSTMENT EQUITY HOLDERS OF THE PARENT MINORITY INTEREST TOTAL EQUITY A.1. Balance at 1 Jan ,200, ,000 95,722-2,935, ,716 7,815,342 1,171 7,815,905 B1.) Changes in equity transactions with owners 0 7,500, ,500, ,500,000 d.) Additional paid-in capital 0 7,500, ,500, ,500,000 B.2. Total comprehensive income for the period ,017-14, ,289 4, ,921 a) Net profit for the period , ,017 4, ,649 c) Consolidated equity adjustment ,728-14, ,728 B.3. Changes within equity , , b) Settlement of loss as a deduction component of equity , , C. Balance at 31 Dec ,200,000 7,950,000 95,722-2,485, ,012 15,750,631 5,803 15,755,826 Accounting policies are a constituent part of the financial statements. 55

56 2. ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.1 Basis for the preparation of consolidated financial statements The consolidated financial statements are prepared in accordance with the Slovenian Accounting Standards (SAS 2006) and the Companies Act, using the accrual and going concern fundamental assumptions. The qualitative accounting characteristics are understandability, relevance, reliability, and comparability. The same accounting policies were applied as in the previous reporting period. Assets and liabilities expressed in a foreign currency are translated to the local currency as at the balance sheet date by applying the reference exchange rate of the ECB. As at the balance sheet date, the Interenergo Group consists of following group companies: Interenergo d.o.o. Ljubljana as the controlling company; Interenergo d.o.o. Zagreb - in sole ownership (100%) of the controlling company; Interenergo d.o.o. Sarajevo - in sole ownership (100%) of the controlling company; PLC Interenergo d.o.o. Beograd - in sole ownership (100%) of the controlling company; Interenergo Makedonia d.o.o.e.l. - in sole ownership (100%) of the controlling company; EHE d.o.o. Banja Luka - in sole ownership (100%) of the controlling company; IEP energija d.o.o. Gornji Vakuf Uskoplje - in sole ownership (100%) of the controlling company; Hidrowatt d.o.o. Beograd - owned by the controlling company holding a 80% equity stake; IE Electric d.o.o. Banja Luka - owned by the controlling company holding a 27% equity stake; LSB elektrane d.o.o. Banja Luka - in sole ownership (100%) of the controlling company; Inter hem d.o.o. Banja Luka - in sole ownership (100%) of the controlling company; Inter Energo d.o.o. Gornji Vakuf Uskoplje - in sole ownership (100%) of the controlling company. All aforesaid companies and accounted for within the consolidated financial statements at 31 December 2012, except the company IE Electric d.o.o. Banja Luka, which is not consolidated under the equity method. The consolidated financial statements of the Interenergo Group include among balances as at 31 December 2012 also items and balances of subsidiaries that refer to transactions with the companies KI - Kelag International GmbH and Kelag - Kärntner Elektrizitäts-Aktiengesellschaft, acting as parent companies of the Interenergo Group. Consequently, the balances and transactions are not eliminated upon the consolidation of the Interenergo Group. The consolidated financial statements for the period from 1 January 2012 to 31 December 2012 were approved by the management on 26 April The consolidated financial statements of the Interenergo Group are available at the registered office of Interenergo d.o.o. The consolidated financial statements for the widest Group of companies are available at the headquarters of the parent company, i.e. KI-KELAG INTERNATIONAL GMBH, Arnulfplatz 2, Postfach 176, Klagenfurt, Austria. Consolidated financial statements A group (of entities) is an economic yet not a legal entity, and as such not an independent holder of rights and duties. Consolidated financial statements are compiled on the basis of separate financial statements of consolidated entities together with adequate consolidation adjustments. A group consists of the parent and the entities controlled by the parent as a result of its equity interest. 56

57 Long-term investments in subsidiaries included in the consolidated financial statements, are in separate financial statements of the parent company valued at cost. Financial statements of subsidiaries are prepared for the same financial year as the financial statements of the parent company by applying the uniform accounting policies. Items in the consolidated balance sheet and the consolidated income statement include all items of the controlling company and its subsidiaries. Items of the consolidated financial statements are not carried on separate accounts; instead, they are transferred from primary balance sheets and income statements of the consolidated entities on the basis of supplementary information and adjustments associated with the elimination of intra-group business relations, and with eliminations and inclusions for various reasons. The fundamental consolidated financial statements include: the consolidated balance sheet, which shows the value of its assets and liabilities at the end of the financial year, the consolidated income statement, which shows revenue and expenses, as well as profit or loss for the financial year, the consolidated statement of other comprehensive income, the consolidated statement of cash flows, which shows the change in cash over the reporting period, and the consolidated statement of changes in equity, which shows changes in equity components in the financial year. The selected format of the consolidated income statement is identified as Format I by the Slovenian Accounting Standards. Theoretically possible items that are not relevant to the group shall not be presented. Revenue of any type was offset against expenses of any type apart from depreciation or amortisation. Instead of these items, profit or loss before tax is included as a new line item in cash flows from operating activities. However, profit or loss before tax as well as income taxes has been adjusted for depreciation and other non-monetary items, and the items whose monetary effects result in cash flows from investing and financing activities. In addition, changes during the period in net operating assets in the balance sheet items (including accruals and deferrals) have been taken into account Information about major line items (cash receipts and cash payments) of the cash flow statement has been obtained: a) by adjusting operating revenue and operating expenses, as well as financial revenue from operating receivables and financial expenses for operating liabilities from the income statement, including changes in current operating assets, accruals and deferrals, provisions and deferred taxes during the period; b) from the Company s books of account (regarding cash flows from financing activities). 2.2 Summary of significant accounting policies Intangible assets and long-term deferred costs and accrued revenue The item of intangible assets includes primarily advances for acquisition of intangible assets. Long-term deferred costs and accrued items represent long-term deferred costs and expenses. An intangible asset shall be recognised in the books of account if it is probable that the expected future economic benefits attributable to the asset will flow to the entity, and the cost of the asset can be measured reliably. Intangible assets are measured by the Group at cost. Intangible assets with finite useful life are amortised in their useful life. Straight-line method of amortisation is applied. The amortisation method and useful lives are checked at the end of each financial year. Following rates of amortisation have been applied by the Group in 2012: Concessions and small hydropower plants 3,56 % Long-term easement rights 6,67 % The recognition of an intangible asset shall be reversed and eliminated from the books of account on disposal or when no future economic benefits are expected from its further use and subsequent disposal. In the books of account an intangible asset shall be carried at its cost, accumulated depreciation and accumulated impairment losses shall be recorded separately; in the balance sheet, however, intangible assets are disclosed exclusively at their carrying amount. 57

58 Property, plant and equipment The item of property, plant and equipment includes mostly equipment in small hydropower plants, small hydropower plants in course of construction and advances for acquiring property, plant and equipment. An item of property, plant and equipment shall be recognised as an asset in the books of account if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. Upon initial recognition, the cost of an asset comprises its purchase price, including import duties and any directly attributable costs of bringing the asset to the condition necessary for its intended use. Subsequent expenditure on an item of property, plant and equipment increases its cost if it increases its future economic benefits in excess of the originally assessed. The cost of a self-constructed or developed item of property, plant and equipment comprises the cost of construction or production of the asset and the indirect costs of its construction or production that may be allocated to it. Capitalised own products refer to capitalised Group s engineering services within their small hydropower plants. Internal profits or losses are not generated. Items of property, plant and equipment are depreciated individually, using the straight-line method without considering the remaining value. In 2012, the Group applied the following depreciation/amortisation rates: Computer and computer equipment 50 % Solar power plants 6.67% Other equipment not located in the small hydropower plants 20 % Plants and equipment in the small hydropower plants % An item of property, plant and equipment shall be derecognised in the books of account and in the balance sheet on its disposal or when no future economic benefits are expected from its use or disposal. Difference between the net profit on disposal and the carrying amount of the disposed item of property, plant and equipment is included in the income statement. While assessing whether there is any indication that an asset may be impaired, the Group at each reporting date considers following: possible evidence that the economic efficiency of the asset was lower; evidence on the asset s obsolescence or damage; significant changes to the scope or manner of present or expected use of asset have occurred or are expected in near future having a negative impact on the company. These changes include non-use of the asset, plans on halting or reorganising of operations, of which the asset is part of, or sale of the asset before the expected date. As for the books of account, the cost is disclosed separately and the same applies to accumulated depreciation and accumulated impairment losses; the balance sheet, however, discloses solely the carrying amount. Investments Long-term investments comprise deposits given and other shares and interests. On initial recognition, long-term investments are measured at cost. The cost of a long-term investment is increased by the transaction costs directly attributable to its acquisition or issue of long-term investment. At each reporting date, the Group assesses whether there is any indication that the investments may be impaired, and whether the carrying amount of net assets exceeds their market value. To account for any required impairments, loans are categorised into groups with similar credit risk levels. Long-term investments in deposits given are measured at amortised cost. Short-term investments represent granted loans which are initially recognised at fair value. At each reporting date, the Group assesses whether there is any indication that the investments may be impaired. To account for any required impairments, loans are categorised into groups with similar credit risk levels. Short-term investments are measured at amortised cost. Operating receivables Receivables of all categories are initially recognised at amounts recorded in the relevant documents, under the assumption that they will be recovered. Receivables are revalued for impairment if their carrying amount exceeds their fair value. Receivables believed not to be settled by their due date or in their full amount are considered as doubtful receivables or, in the case of litigation, as disputable receivables. Allowances are formed for disputable and doubtful receivables ; allowances are formed for such receivables and charged against revaluation operating expenses. To account for impairment, receivables are categorised into groups with similar credit risk levels, based on their maturity. Allowances for receivables are formed individually by taking into account management s assessment that is made based on previous experiences. A significant part of receivables refers to input VAT receivables. 58

59 Cash Cash comprises cash on hand, bank balances and cash equivalents. Cash equivalents are short-term deposits with banks and call deposits with a maximum maturity of up to three months. Deferred costs and accrued revenue Deferred costs and accrued revenue comprise short-term deferred costs or expenses and short-term accrued revenue. They are disclosed separately and classified into major categories. They mostly refer to services referring to the sale of electricity that had already been rendered in the reporting period but not yet invoiced. Deferred costs and accrued revenue are disclosed in amounts recorded in the relevant documents evidencing their accrual. Equity Total equity comprises called-up capital, capital surplus, revenue reserves, retained earnings or retained losses and consolidated equity adjustment. Minority interest is presented separately. Total comprehensive income for the period consists of the net profit or loss for the period and other comprehensive income that includes items of revenue and expenses not recognised in the profit or loss. Financial liabilities Financial liabilities are loans and borrowings received based on loan contracts. Financial liabilities are either longterm if they are to be repaid in a period longer than one year, or short-term. Financial liabilities are initially recognised at the amounts arising from the relevant documents, which evidence the receipt of cash or the settlement of other liability. After recognition they are measure at amortised cost by using the effective interest rate method. Operating liabilities Operating liabilities are supplier credits for goods or services purchased, payables to employees for their work performed, and liabilities to the state arising from taxes. A significant part of liabilities refers to input VAT liabilities. A specific class of operating liabilities are liabilities to customers arising from advances and short-term collaterals received. Operating liabilities are either long-term if they are to be settled in a period longer than one year, or short-term liabilities, which include those already due (but not yet settled and those due within the period of one year. They are initially recognised at amounts recorded in the relevant documents that prove the receipt of products or services or work performed, or the accounted costs or expenses in the reporting period. Accrued costs and deferred revenue Short-term accrued costs and deferred revenue comprise short-term accrued costs or expenses and short-term deferred revenue. They are recognised separately and classified into major categories. They mostly refer to the services related to the sale of electricity, for which no invoices were yet received by the end of the reporting year. The revenue and expenses incurred in the sale and purchase of electric energy are accrued on the basis of the past trading results. Operating expenses are accrued by the Group on the basis of information relating to the previous months. Revenue Revenue is recognised if it is possible that increases in economic benefits shall occur and those increases can be measured reliably. Revenue is classified into operating revenue, financial revenue and other revenue. Operating revenue and financial revenue are ordinary revenue. Operating revenue comprises revenue from sale of electricity and electrical capacities and other operating revenue associated with products and services. Financial revenue is revenue generated by investment activities. It arises in relation to investments, as well as in relation to receivables. Sales revenue shall be recognised when the entity has transferred to the buyer the significant risks and rewards of ownership; the amount of revenue can be measured reliably; when it is probable that economic benefits associated with the transaction will flow to the entity; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. The Group is engaged in wholesale of electricity. Revenue generated on sale of electricity are recognised when the electricity is supplied to the wholesale dealer and the contractually-agreed place of supply, and all the risks are transferred from seller to buyer. 59

60 Expenses Expenses shall be recognised if decreases in economic benefits during the accounting period are associated with decreases in assets or increases in liabilities and such decreases can be measured reliably. Expenses are classified as operating expenses, financial expenses and other expenses. Operating expenses and financial expenses are ordinary expenses. Financial expenses include financing expenses and investment expenses. The former primarily comprise interest paid, while the latter predominantly have the nature of revaluation financial expenses. The Group is engaged in wholesale of electricity. Expenses are recognised when the electricity is received at the contractually-agreed place of supply, and all the risks are transferred from seller to buyer. Revaluation operating expenses arise in connection with current assets as a result of their impairment. Costs of materials and services Costs of materials and services include expenses incurred in connection with materials and services. Labour costs Labour costs include wages and salaries earned by employees, in their gross amount; compensations to which the employees are entitled under the law, collective bargaining agreement or employment contracts for the period of absence from work, and which an entity is obliged to cover in their gross amounts; and taxes and contributions additionally accrued on these items and charged against the employer. Labour costs shall be recognised on the basis of documents evidencing the work performed and on other accounting bases used to calculate the gross amounts of wages and. Income tax Current tax liabilities (assets) for the current and prior financial years are measured at the amount expected to be paid or recovered from the taxation authorities, using the tax rates enacted by the balance sheet date. Deferred taxes Deferred tax assets and deferred tax liabilities are accounted for using the liability method. Only those deferred tax assets and liabilities are recognised which derive from temporary differences. A deferred tax asset is recognised also for unused tax losses and tax credits, which are transferred to the next financial year if it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. At each balance sheet date an entity reassesses deferred tax assets and reduces or impairs a part of the deferred tax asset if it is no longer probable that sufficient taxable profit will be available to allow the unused tax losses to be utilised. Deferred tax assets are not discounted. Deferred tax assets or deferred tax liabilities are measured using the tax rates expected to be used when the asset is realised or the liability settled. In this relation, the Group uses tax rates enacted as at the balance sheet date. 60

61 2.3 Notes to the consolidated financial statements Intangible assets 31 Dec Dec 2011 Intangible assets 2,583, ,731 Movement in intangible assets in 2012: COST Goodwill Concessions, patents, licences, trademarks and similar rights Advances for intangible assets Balance at 1 Jan , , ,576 Additions 448,475 1,981, ,430,290 Disposals Transfer for use , ,850 Balance at 31 Dec ,475 2,015,065 77,475 2,541,015 ACCUMULATED AMORTISATION Goodwill Concessions, patents, licences, trademarks and similar rights Advances for intangible assets Balance at 1 Jan , ,251 Amortisation 0-4, ,275 Disposals Balance at 31 Dec , ,525 CARRYING AMOUNT Goodwill Concessions, patents, licences, trademarks and similar rights Advances for intangible assets Balance at 1 Jan , ,325 Balance at 31 Dec ,475 1,977,540 77,475 2,503,490 Total Total Total Intangible assets and long-term deferred costs and accrued revenue 31 Dec Dec ,710 5, Long-term deferred costs and accrued revenue 7,820 5, Long-term development 71,890 0 Long-term development costs in the amount of EUR 71,890 EUR refer to development and implementation of the new trading system. Inter-Hem d.o.o. and LSB elektrane d.o.o. were consolidated for the first time since Interenergo d.o.o. Ljubljana gained control over both companies in Goodwill occurred as the difference between the equity of Inter-Hem d.o.o. and LSB elektrane d.o.o., and the purchase price. A valuation and impairment testing was carried out for power stations, which already operate or their construction is in its final stage. No impairment testing was carried out for the aforesaid companies as they are both in the process of development and investments. The basic assumptions of the project have not changed. 61

62 Movement in intangible assets in 2011: Cost Concessions, patents, licences, trademarks and similar rights Advances for intangible assets Long-term deferred costs and accrued revenue Balance at 1 Jan , ,724 Additions 1 780,325 4, ,258 Balance at 31 Dec , ,325 5, ,982 ACCUMULATED AMORTISATION Concessions, patents, licences, trademarks and similar rights Advances for intangible assets Long-term deferred costs and accrued revenue Balance at 1 Jan , ,831 Amortisation -3, ,420 Balance at 31 Dec , ,251 CARRYING AMOUNT Concessions, patents, licences, trademarks and similar rights Advances for intangible assets Long-term deferred costs and accrued revenue Total Total Total Balance at 1 Jan , ,892 Balance at 31 Dec ,325 5, ,731 Advances for intangible assets relate to financing transmission line for connecting small hydropower plant on the Ugar river in Bosnia and Herzegovina. Intangible assets are not pledged as collateral for liabilities. In 2012, intangible assets were not impaired Property, plant and equipment 31 Dec Dec 2011 Property, plant and equipment 27,335,587 13,733,669 Movement in property, plant and equipment in 2012: Cost Buildings Manufacturing plant and equipment PPE in course of construction Advances for acquisition of PPE Balance at 1 Jan ,751 4,535,774 8,063,650 1,020,213 13,792,388 Additions 2,521,668 2,869, ,872 1,945 5,495,527 Transfer for use 508,626 8,918,326-7,729, , ,851 Disposals 0 10, ,096 Revaluation -13,790-40, ,045 Changes in consolidation (fixed assets in acquired 77,861 7,311, , ,645,045 shares) Balance at 31 Dec ,267,116 23,604, ,575 27,510 27,591,862 ACCUMULATED DEPRECIATION Buildings Manufacturing plant and equipment PPE in course of construction Advances for acquisition of PPE Balance at 1 Jan ,110-45, ,726 Depreciation -12, , ,901 Transfer Disposals 0-59, ,998 Revaluation 1,069 1, ,034 Changes in consolidation (fixed assets in acquired shares) Balance at 31 Dec , , ,274 CARRYING AMOUNT Buildings Manufacturing plant and equipment PPE in course of construction Advances for acquisition of PPE Balance at 1 Jan ,641 4,490,158 8,063,650 1,020,213 13,733,662 Balance at 31 Dec ,242,146 23,373, ,575 27,510 27,335,588 Total Total Total 62

63 Movement in property, plant and equipment in 2011: Cost Buildings Manufacturing plant and equipment PPE in course of construction Advances for acquisition of PPE Balance at 1 Jan ,128 3,987, ,653 4,853,741 Additions 0 4,000,765 4,746,085 2,103,795 10,850,645 Transfer for use 172, , , Disposals 0-3, ,915,235-1,918,342 Revaluation 0 7 6, ,344 Balance at 31 Dec ,751 4,535,774 8,063,650 1,020,213 13,792,388 ACCUMULATED DEPRECIATION Buildings Manufacturing plant and equipment PPE in course of construction Advances for acquisition of PPE Balance at 1 Jan ,789-10, ,626 Depreciation -13,408-19, ,675 Transfer 0-10,939 10, Disposals 0 3, ,107 Revaluation Balance at 31 Dec ,110-45, ,719 CARRYING AMOUNT Buildings Manufacturing plant and equipment PPE in course of construction Advances for acquisition of PPE Balance at 1 Jan ,339 3,977, ,653 4,824,116 Balance at 31 Dec ,641 4,490,165 8,063,650 1,020,213 13,733,669 The value of the the building in the amount of EUR 456,967 relates to the small hydropower plant in Gornji Vakuf, Bosnia and Herzegovina. Most of the building's value represents the hydropower plant on the Ugar river in Bosnia and Herzegovina (EUR 2,521,668). The value of the small hydropower plant on the Poštica river in Serbia is recorded at EUR 185,650. The value of manufacturing plant and equipment (machines) includes also the hydropower plant, whereas also the solar power plants in Slovenia record an added value in the amount of EUR 2,561,756. Most of the equipment's value refers to EHE d.o.o. (EUR 9,674,439), to IEP energija d.o.o. Gornji Vakuf Uskoplje (EUR 3,447,645 of machines), to Inter-Energo d.o.o. Gornji Vakuf Uskoplje (EUR 7,250,348 of manufacturing plant and machines), and to Hidrowatt d.o.o. (EUR 411,491). Property, plant and equipment being acquired include assets invested in the construction of additional hydropower plants on the Ugar river in Bosnia and Herzegovina and hydropower plant on river Sana in Bosnia and Herzegovina. Also advances for the acquisition of property, plant and equipment refer to these two power plants. Manufacturing plant and equipment in course of construction are not subject to depreciation. Property, plant and equipment are not pledged as collateral for liabilities and were not impaired in the reporting period. Total Total Total Long-term investments 31 Dec Dec 2011 Long-term investments 1,460 46,898 Other shares and interests Other long-term investments 1,000 46,438 Other shares and interests in the amount of EUR 460 refer to the 27% equity share in the company IE Electric d.o.o. from Banja Luke acquired in Long-term loan extended in the amount of EUR 1,000 relates to the company IE Electric d.o.o. Banja Luka. During the consolidation procedure intra-group financial liabilities were offset with intra-group financial receivables in the amount of EUR 15,617,000. No consolidation differences have occurred in connection with this item. 63

64 2.3.4 Long-term operating receivables 31 Dec Dec 2011 Long-term operating receivables due from others 46, Interenergo d.o.o. Zagreb granted collateral to the operator of the cross-border capacities transmission system for trades in January Deferred tax assets 31 Dec Dec 2011 Deferred tax assets 366, ,089 Deferred tax assets relate to the impairment of investments, impairment of receivables, impairment of loans of Interenergo d.o.o. Ljubljana and to the tax losses of the companies of EHE d.o.o., Banja Luka,Inter-Hem d.o.o. Banja Luka, and LSB elektrane d.o.o. The net effect of deferred tax assets for the year 2012 is EUR -6, Short-term investments 31 Dec Dec 2011 Short-term loans 0 367,939 The Group has not extended loans to other parties. During the consolidation procedure, intra-group financial liabilities were offset with intra-group financial receivables in the amount of EUR 5,233,751. No consolidation differences have occurred in connection with this item Short-term operating receivables 31 Dec Dec 2011 Short-term operating receivables 7,919,926 11,829, Short-term trade receivables 3,183,695 4,261, Short-term trade receivables due from others 4,736,231 7,568,680 The item of short-term operating receivables due from others include mostly VAT receivables that account for EUR 3,415,752, whereas the remaining amount represents collaterals granted to domestic and foreign operations, as well as other receivables. A part of receivables is secured by bank guarantees and guarantees provided by several parent companies of trading partners. Most of the receivables, however, remain unsecured. The Group recorded a receivable due from the parent company Kelag in the amount of EUR 147,788. As at the 31 December 2012, the Group recorded no receivables due from members of the management, members of the supervisory board or internal owners. Short-term operating receivables are not overdue. During the consolidation procedure, intra-group liabilities were offset with intra-group receivables in the amount of EUR 17,280,980. Accordingly, consolidation differences amounted to EUR 3, Cash 31 Dec Dec 2011 Cash 2,143,248 2,894,834 Cash in hand ,680 Bank balances 2,142,538 2,873,154 The overdraft coverage of Interenergo d.o.o. Ljubljana at the UniCredit Bank d.d. is set at EUR 1.5 million and used for current operations. 64

65 2.3.9 Short-term deferred costs and accrued revenue 31 Dec Dec 2011 Short-term deferred costs and accrued revenue 19,785,262 12,209,625 Short-term deferred costs 181, ,643 Accrued revenue - customers 16,843,350 8,734,364 Accrued revenue - Kelag 2,760,717 3,021,618 As at 31 December 2012, the Group formed short-term accruals and deferrals for revenue that had not yet been invoiced and refer to sale of electricity in the month of December Revenue to the parent company not yet invoiced is recorded in the amount of EUR 2,760,717. Revenue not yet invoiced to other customers is recorded at EUR 16,843,350. During the consolidation procedure, no off-sets were carried out, hence no consolidation differences occurred in connection with short-term deferred costs and accrued revenue Equity 31 Dec Dec 2011 Equity 16,001,676 15,756,434 Share capital 10,200,000 10,200,000 Capital surplus 7,950,000 7,950,000 Legal surplus 95,722 95,722 Retained losses -2,227,292-2,485,079 Net profit or loss 0 0 Consolidation equity adjustment -49,242-10,012 Minority interest 32,488 5,803 The net profit for 2012 was allocated to cover retained losses from previous periods as required under the Companies Act. As at the balance sheet date, capital surplus amounted to EUR 7,950,000. Taking into account the revaluation of the opening balance of equity (EUR 15,756,434), adjusted to the cost-ofliving index which in 2012 lied at 2.7%, equity should be increased by EUR 425,069 to account for maintaining its purchasing power (opening balance of equity * % cost-of-living index). The adjusted result for the period would thus correspond to EUR -164,368 (loss for the period minus increase in equity) ((opening balance of equity * % cost-ofliving index) +/- profit or loss for the period). Consolidation equity adjustment results from exchange rate differences incurred upon translation from foreign currencies and the consolidation of the financial statements of subsidiaries. The items in the balance sheet are translated to euro using the closing exchange rate of the OENB, while the average exchange rate of the OENB was applied in the income statement. Minority interest amounts to EUR 32,488 and is held by the minority shareholder, i.e. the company Hidrowatt d.o.o., Serbia, which holds 20% of the total equity Long-term financial liabilities 31 Dec Dec 2011 Long-term financial liabilities 13,800,000 3,900,000 Long-term financial liabilities represent the loan extended by the parent company KI-KELAG International GmbH in the amount of EUR 13,800,000. The said loan, which bears the market interest rate, is not secured and matures at the end of The loan is earmarked for subsidiaries in connection with constructing small hydro power plants in Bosnia and Herzegovina, and to provide for liquidity in trading with the Group s electricity. The Group records no long-term liabilities to members of the management and members of the supervisory board. 65

66 Long-term operating liabilities 31 Dec Dec 2011 Long-term operating liabilities 2,460,308 10,384 Long-term operating liabilities include other liabilities of the company Interenergo d.o.o. Gornji Vakuf (EUR 2,450,038) and the company EHE d.o.o. Banja Luka (EUR 10,271) Short-term financial liabilities 31 Dec Dec 2011 Short-term financial liabilities 18,232 1,200 Short-term financial liabilities to banks Other short-term financial liabilities 18,232 1,074 Other short-term financial liabilities include the loan of Interenergo d.o.o., Gornji Vakuf Uskoplje, Bosnia and Herzegovina (EUR 16,873) and interest liability relating to the company Inter-Hem d.o.o. Banja Luka (EUR 1,355). Liabilities are not secured. The Group records no short-term liabilities to members of the management and members of the supervisory board. During the consolidation procedure, intra-group financial liabilities were offset with intra-group financial receivables in the amount of EUR 16,826,711. No consolidation differences arose in connection with this item Short-term operating liabilities 31 Dec Dec 2011 Short-term operating liabilities 12,516,716 6,478,931 Short-term operating liabilities to group companies 0 10,831 Short-term trade payables 8,222,043 1,998,141 Other short-term operating liabilities 4,294,673 4,469,959 Short-term trade payables refer to domestic and foreign customers. As at 31 December 2012, trade payables are not overdue. Other short-term liabilities include predominantly payables to the state i.e. VAT and other taxes (EUR 2,779,629) and advances received (EUR 1,424,144) Short-term accrued costs and deferred revenue 31 Dec Dec 2011 Short-term accrued costs and deferred revenue 15,384,215 16,095,485 Accrued costs 276, ,686 Accrued costs of electricity 10,306,514 13,581,123 Accrued costs of electricity - Kelag 4,801,365 1,769,676 As at the balance sheet date, the Group formed short-term accruals and deferrals for accrued costs that refer to the sale of electricity in the month of December Accrued costs of electricity due from suppliers amount to EUR 10,306,514, costs of electricity due from the company Kelag amount to EUR 4,801,365, whereas other accrued costs were recorded in the amount of EUR 276,336. During the consolidation procedure, no off-sets were carried out, hence no consolidation differences occurred in connection with short-term accrued costs and deferred revenue. 66

67 Net sales Net sales 195,230, ,012,550 Net sales generated on the domestic market 176,551,499 20,633,794 Net sales generated on the foreign market 18,679, , Of the total net sales recorded by the Interenergo Group, EUR 176,551,499 (2011: EUR 186,378,756 was generated by Interenergo d.o.o. Slovenija, which accounts for 90% (2011:91%) of the total net sales of the Group. In 2012, revenue generated with the company Kelag based on sale of electricity amounted to EUR 24,213,955 (2011: EUR 32,382,835) Capitalised own products Capitalised own products 302, ,776 The item of capitalised own products refers to the engineering services capitalised within the Group s small hydropower plants, in particular within the Novakovići power plant on the Ugar river in Bosnia and Herzegovina, No intra-group profits or losses were generated during the capitalisation Other operating revenue Other operating revenue 547, ,661 Exchange gains generated during trading with electricity amounted to EUR 223,404 and are attributable mostly to the movements of the RSD exchange rate. Other operating revenue are recorded at EUR 317,799 (2011: EUR 277,203), whereof EUR 164,616 (2011: EUR 206,400) relates to revenue from services charged to the company Kelag Costs of goods, materials and services Costs of goods, materials and services -193,716, ,784,652 Costs of goods and materials sold and costs of materials used -192,301, ,378,049 Costs of services -1,415,148-1,406,603 Costs of goods and material sold comprise the electricity purchased and costs of electricity transfer, which include the transfer capacity costs, export duties, forwarding services and other costs. In 2012, electricity worth EUR 50,404,404 (2011: EUR 27,299,908) was purchased from Kelag. Significant costs of services that were incurred in 2011 include: costs of professional and personal services in the amount of EUR 261,674 (2011: EUR 388,494); exchange losses relating to trading with electricity in the amount of EUR 340,858 (2011: EUR 388,280); costs of banking services in the amount of EUR 146,300(2011: EUR 162,550); costs of rentals and other costs relating to business premises in the amount of EUR 34,411 (2011: EUR 107,899); costs of taxes and duties (exclusive of income tax) in the amount of EUR 81,270 (2011: EUR 90,739); costs of subscriptions in the amount of EUR 2,476 (2011: EUR 61,795); costs of business trips in the amount of EUR 76,641 (2011: EUR 50,338). In 2012, the fee of the auditor amounted to EUR 36,085 (2011: EUR 32,590) and includes the auditing of the annual report of the parent company and its subsidiaries. 67

68 Costs by function Costs of goods sold -192,301, ,378,049 Selling expenses -935,951-1,409,851 Costs of general and administrative services -935,951-1,409,851 Total costs by function 194,183, ,197, Labour costs Labour costs -1,270, ,242 Payroll costs -1,041, ,613 Social security costs -74,679-60,567 Pension insurance costs -105,811-84,009 Other labour costs -48,476-54,053 As at 31 December 2012, the Group recorded 30 full-time employed staff (2011: 21 employees). No claims by staff are recorded that would be contradicted by the company. Structure of employees in terms of their education: EDUCATIONAL STRUCTURE No. of employees as at 1 Jan 2012 Leavers / new entrants 2012 No. of employees as at 31 Dec 2012 Percentage Secondary school education % High school education % University education % Master's degree % TOTAL % Total remuneration paid to groups of persons 577, ,942 Members of the management and holder of procuration 232, ,355 Other employees under individual contracts 344, , Write-downs in value Write-downs in value -578, ,186 Amortisation and depreciation expense -145,843-61,230 Revaluation operating expenses associated with current operating assets -432,445-92,956 The item of revaluation operating expenses associated with current operating assets includes mostly allowances formed for receivables and advances. 68

69 Other operating expenses Other operating expenses -23, ,671 Other operating expenses refer to other expenses that occurred as a result of conducting the Group s core activity Financial revenue Financial revenue 235,015 36,748 Financial revenue from loans to others 235,015 36,748 Financial revenue from operating receivables refers to the interest received on deposits, interest paid by customers and other interest Financial expenses for financial liabilities Financial expenses -417, ,061 Financial expenses due to impairment and write-offs ,622 Financial expenses for financial liabilities due from group companies -354, ,261 Financial expenses for other financial liabilities -62,072-12,178 Financial expenses due to impairment and write-offs of investments in 2012 refer to the impairment of the loan extended to an unrelated entity in Slovenia. Financial expenses for loans received refer to KI-Kelag International GmbH in the amount of EUR 354,548 (2011: EUR 174,261) Income tax Profit before tax 310, ,923 Adjustment of revenue to account for tax qualifying expenses -490,787 0 Adjustment of expenses to account for tax qualifying expenses 719, ,901 Utilised tax benefits -1,048, ,007 Other 637, ,137 Total tax base 127, ,680 Level of income tax 18 % 20% Income tax -55,505-70, Contingent liabilities For the purpose of trading, the Company issued bank guarantees to the companies CAO Central Allocation Office GmbH, Amprion GmbH, BSP Regional Energy Exchange LLC, APCS Power Clearing and Settlement AG. The Company issued also parent company guarantee to RWE Supply & Trading GmbH and E. On Energy SE. For the purpose of investing, the Company issued a bank guaranty in the total amount of EUR to the company Rosewood d.o.o. Group companies i.e. EHE d.o.o Banja Luka, LSB elektrane d.o.o., Inter-Hem d.o.o., and PLC IE d.o.o. have issued guarantees to the Serbian government and the public institution Javno preduzeće Elektroprivrede Srbije in the amount of EUR 559,

70 Concessions for the hydropower plants The schedule below outlines the duration of concessions per individual hydropower plant. Concession is valid for the period of 30 years, with the possibility of a prolongation by 15 years. Consession period for HPP Novakovići is set to 28 years with possibility of prolongation. The fees are defined in advance within contracts. In case of the Balkan countries, a certain political risk exists that could have an impact on concessions obtained. Hydropower plant Jelići Ružnovac Derala Company: Inter-Energo d.o.o. Gornji Vakuf Uskoplje Inter-Energo d.o.o. Gornji Vakuf Uskoplje Inter-Energo d.o.o. Gornji Vakuf Uskoplje Starting date: 29 December September March 2012 Valid until: Hydropower plant Duboki potok Sastavci Novakovići Company: IEP energija d.o.o. Gornji Vakuf Uskoplje IEP energija d.o.o. Gornji Vakuf Uskoplje EHE d.o.o. Banja Luka Starting date: 12 January December October 2012 Valid until: Significant events after the balance sheet date No events have occurred after the reporting period that would have an impact on the Group s consolidated financial statements for Managing Director: Christian Schwarz Managing Director: Anton Papež Ljubljana, 26 April

71 6. Independent Auditor s Report 71